The one-month, three-month and six month indices for the London Inter-Bank Offered Rate (LIBOR) were on the decline in July while the one-year average rose.
Click “read more” to view a historical breakdown of the various LIBOR indices over the past 12 months.
Sources: Wall Street Journal, British Bankers’ Association
The LIBOR, or “London Inter-Bank Offered Rate,” is based on rates that contributor banks in London offer each other for inter-bank deposits.
From a bank’s perspective, deposits are simply funds that are loaned to them.
So, LIBOR is basically a rate at which a fellow London bank can borrow money from other banks.
The original LIBOR is published by the British Bankers Association (BBA) shortly after 11:00 each day, London time, and is a filtered average of inter-bank deposit rates offered by designated contributor banks, for maturities ranging from overnight to one year.
The shorter rates, i.e. up to 6 months, are usually quite reliable and tend to precisely reflect market conditions at measurement time. The actual rate at which banks will lend to one another will, however, continue to vary throughout the day.
Rate calculations are complex as they incorporate numerous variables such as time, maturity and currency rates.
Besides the U.S. dollar and the Pound Sterling, other currencies which use the LIBOR as a significant reference rate also include the Swiss Franc, the Yen, the Canadian dollar and the Danish Krone.