LIBOR is the rate on dollar-denominated deposits,
also know as Eurodollars, traded between banks in London. The
index is quoted for one month, three months, six months as well
as one-year periods.
LIBOR is the
base interest rate paid on deposits between banks in the
Eurodollar market. A Eurodollar is a dollar deposited in a bank
in a country where the currency is not the dollar. The
Eurodollar market has been around for over 40 years and is a
major component of the International financial market. London is
the center of the Euromarket in terms of volume.
The LIBOR
rate quoted in the Wall Street Journal is an average of rate
quotes from five major banks. Bank of America, Barclays, Bank of
Tokyo, Deutsche Bank and Swiss Bank.
The most
common quote for mortgages is the 6-month quote. LIBOR's cost of
money is a widely monitored international interest rate
indicator. LIBOR is currently being used by both Fannie Mae and
Freddie Mac as an index on the loans they purchase.
LIBOR is
quoted daily in the Wall Street Journal's Money Rates and
compares most closely to the 1-Year Treasury Security index.
