Bond market investors are scratching their heads this morning as the UK's Financial Conduct Authority CEO made a speech suggesting an end to LIBOR by 2021 and a beginning to alternative market benchmarks in the meantime. LIBOR is an average interest rate from 20 banks. It is used as a starting point for other interest-rate setting institutions globally but has been under broad criticism for a long period as it is easily manipulated and based on a set of relatively illiquid trades.
If managed appropriately, the change to other benchmarks could be seamless but nonetheless the suggestion caused tepid nervousness in Treasury bonds that is bleeding over to MBS. So far, mortgages are trading down 8 bps.
If managed appropriately, the change to other benchmarks could be seamless but nonetheless the suggestion caused tepid nervousness in Treasury bonds that is bleeding over to MBS. So far, mortgages are trading down 8 bps.
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