What is LIBOR?

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"LIBOR stands for London Interbank Offered Rate."

LIBOR: The basic rate of interest for lending between banks on the London interbank market, as well as a reference rate for setting interest rates on other loans.

The London Interbank Offer Rate, or LIBOR, is the interbank market's global reference rate for unsecured short-term borrowing. It serves as a comparison point for short-term interest rates. Interest rate swaps, currency rate swaps, and mortgages are all priced using it. It serves as an indicator of the financial system's health and predicts the direction of central bank's upcoming policy rates.

Description:

The Intercontinental Exchange, or ICE, manages LIBOR. It is calculated for five currencies and seven maturities ranging from overnight to a year. The Swiss franc, euro, pound sterling, Japanese yen, and US dollar are the five currencies for which LIBOR is computed/calculated. For each currency, 11 to 18 banks contribute to the ICE benchmark administration.

To eliminate outliers, the rates received from the banks are arranged in descending order and the top and bottom quartiles are excluded. The LIBOR rate is then calculated by taking the arithmetic mean of the remaining data. The process is repeated for each of the five currencies and seven maturities, generating 35 reference rates in total. The most commonly used reference rate is the three-month LIBOR.

How LIBOR is used:

It's a cost-setting index for variable-rate loans. Lenders adjust interest rates based on such a variable index as economic conditions change. They then take the index and add a fixed number of percentage points called a margin to determine the interest rate you must pay. When this index rises/goes up, interest rates of the loans that are linked to it also rises/go up. It has traditionally been a reference figure for corporate financial transactions, though it is increasingly used for consumer loans.

Illustration:

Assume a company issued a six-month LIBOR-linked floating rate note. The coupon amount will be calculated on each coupon date as the par value of the note divided by half of the six-month coupon rate quoted six months prior. Assuming that the LIBOR rate was 4% in the previous six months and that the note's par value is 100 pounds, the current coupon amount will be 100 times (4% /2) = 2.

If the current period's 6-month LIBOR rate changes to 3.25%, the next 6-month coupon will be 100 times (3.25 percent /2) equal 1.625.

WHAT IS LIBOR TRANSITION?

The “LIBOR transition” refers to the financial markets' shift away from LIBOR as an interest rate benchmark and toward alternative “risk-free” benchmark rates (RFRs).

History of LIBOR:

LIBOR was previously set by the British Bankers Association (BBA), but after the rigging and manipulation of LIBOR during the 2008 financial crisis, financial market watchdogs decided to replace the BBA LIBOR with a new administrator. The Hogg Tendering Advisory Committee chose a new entity called the Intercontinental Exchange to administer LIBOR based on the Wheatley Review Recommendation. The new administrator started working in February of 2014.

30 Days (1 month) LIBOR Rate - [LIBOR for 1 month]

As of August 04, 2021

‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎	THIS WEEK	MONTH AGO	YEAR AGO
1 Month LIBOR Rate	0.09	0.09	0.16

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90 Days (3 months) LIBOR Rate - [LIBOR for 3 months]

As of August 04, 2021

‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎	THIS WEEK	MONTH AGO	YEAR AGO
3 Month LIBOR Rate	0.12	0.13	0.25

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180 Days (6 months) LIBOR Rate - [LIBOR for 6 months]

As of August 04, 2021

‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎	THIS WEEK	MONTH AGO	YEAR AGO
6 Month LIBOR Rate	0.16	0.15	0.34

[Source and check for the update, Click here]

360 Days (1 year) LIBOR Rate - [LIBOR for 1 year]

As of August 04, 2021

‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎ ‎‏‏‎	THIS WEEK	MONTH AGO	YEAR AGO
1 Year LIBOR Rate	0.24	0.24	0.46

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LIBOR Rate History

LIBOR 1 month rate history, LIBOR 3 months rate history, LIBOR 6 months rate history, LIBOR 1 year rate history