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New Interbank Sterling Loan Rate Launched

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A new interbank lending rate, to be launched on Monday, could help protect bank balance sheets from fluctuating interest rates and, backers hope, will lead to a more secure financial system.

The rate, created for sterling loans, will help UK banks and building societies as well as international institutions, which also trade in the pound, improve the hedging of their rate risks.

http://www.ft.com/cms/s/819b6068-8fa8-11e0-954d-00144feab49a,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F819b6068-8fa8-11e0-954d-00144feab49a.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fuk

What difference does this make?

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What does it mean for interest and mortgage rates, particularly in the event of sterling devaluing?

Nothing.

A basis swap market will emerge between Libor and the new index giving the banks a chance to make even more trading profits.

The marginal supplier of funding to UK banks is the global asset swap market who swap their assets back into USD or EUR Libor.

The marginal cost of the term structure of asset swap funding to UK banks is the global market's perception of the creditworthiness of UK banks.

Edit : Spelling

Edited by LuckyOne

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Noting.

A basis swap market will emerge between Libor and the new index giving the banks a chance to make even more trading profits.

The marginal supplier of funding to UK banks is the global asset swap market who swap their assets back into USD or EUR Libor.

The marginal cost of the term structure of asset swap funding to UK banks is the global market's perception of the creditworthiness of UK banks.

Hmmmm, I'm a little confused.

Is this basically an attempt at fixing the market in favour of UK banks then? Just more fighting reality?

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Hmmmm, I'm a little confused.

Is this basically an attempt at fixing the market in favour of UK banks then? Just more fighting reality?

It is an attempt by a small number of British institutions to take control over the index against which their funding is priced. They are way too late as Libor has become entrenched as the market standard.

Libor is the reality. Everything else will just be a basis swap (fixing the spread between Libor and the alternate index for a fixed period of time). It is all a bit pointless really.

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It is an attempt by a small number of British institutions to take control over the index against which their funding is priced. They are way too late as Libor has become entrenched as the market standard.

Libor is the reality. Everything else will just be a basis swap (fixing the spread between Libor and the alternate index for a fixed period of time). It is all a bit pointless really.

Thanks, so this isn't going to help mask insolvency and market panic in the future then. :)

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Thanks, so this isn't going to help mask insolvency and market panic in the future then. :)

Not at all.

This is fiddling around at the edges at best.

The basic fact that the the insolvency of many British (and American for that matter) institutions has been masked by a flood of liquidity hasn't changed.

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I agree. It's collaterised and only gilts at that by the looks of it. Looks to be just a means of short-term borrowing/lending for the smaller places who have been been charged through the nose cash rates via the market.

What would be interesting would be to note the participants, as this could give a clue to their underlying solvency and likelihood of failing first.

Edited by Jack's Creation

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It is an attempt by a small number of British institutions to take control over the index against which their funding is priced. They are way too late as Libor has become entrenched as the market standard.

Libor is the reality. Everything else will just be a basis swap (fixing the spread between Libor and the alternate index for a fixed period of time). It is all a bit pointless really.

Obviously that depends if they manage to get the new index written into all new derivative contracts etc.. Some contracts are already BoE base

rate linked anyway. It can go either way really.. but giving the biggest bank control of an index in a time where retail revenues are harder

to come by... my guess will be that contracts linked to these new index will be more expensive...

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That rather depends if you're paying or receiving.....

If the bid / ask spread is wide enough and you have roughly similar numbers of payers and receivers, you don't actually care what the basis is .....

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  • 309 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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