Is the Libor Wrong?

The benchmark interest rate for $62 trillion of credit derivatives and mortgages for 6 million U.S. homeowners faces its biggest shakeup in a decade as lawmakers question if banks are understating borrowing costs.

For the first time since 1998, the British Bankers’ Association is considering changing the way it sets the London interbank offered rate, according to Chief Executive Officer Angela Knight, who appeared before a parliamentary committee in London today.

The BBA, an unregulated London-based trade group, sets Libor by polling 16 banks each day on the rates they pay for loans in dollars, British pounds, euros and eight other currencies.

The association is under pressure to show the rates are reliable following complaints by investors that financial institutions weren’t telling the truth after the collapse of subprime mortgages nine months ago contaminated credit markets and drove up borrowing costs.

While the BBA set the one-month dollar Libor rate at 2.72 percent on April 7, the Federal Reserve said banks paid 2.82 percent for secured loans later that day.

Secured loans typically yield less than unsecured debt.

“The Libor numbers that banks reported to the BBA were a lie,” said Tim Bond, head of global asset allocation at Barclays Capital in London. “They had been all the way along. The BBA has been trying to investigate them and that’s why banks have started to report the right numbers.”

So, are we going to have a new Libor?

When?

 

Technorati Tags: Libor, Interest Rate, fvarga

Euro Retraces - Rates

Having given back some of its recent rally, the US Dollar looks poised to regain momentum again the Euro, Swiss Franc and the Yen.

The Canadian dollar too looks weakly positioned against the greenback above support of the long-held range.

While the Australian continues to show very few chinks in the armor despite clear deterioration in fundamentals as the yield advantage guide price action, the New Zealand dollar collapse has accelerated.

At posting time (18:10 - GMT+8 ) rates are:

EURUSD	1.5462
USDJPY	103.675
GBPUSD	1.9464
USDCAD	1.0094
USDCHF	1.0481
EURCHF	1.6206
EURGBP	0.7944
EURJPY	160.3023
USDTWD	30.8877
AUDUSD	0.9407
NZDUSD	0.7664
USDSGD	1.3698
EURTWD	47.7586

 

Technorati Tags: Forex, Currencies, fvarga

Asian Stocks Rise for Second Day on Higher Earnings Forecasts

Asian stocks rose for a second day, led by technology companies and automakers, after higher profit forecasts by Fujitsu Ltd. and Isuzu Motors Ltd. bolstered speculation earnings will withstand a global slowdown.

“Asian companies are still generally expected to grow at a reasonable rate,” said Jean Salata, chief executive of Baring Private Equity Asia Group, which manages $3.4 billion.

The MSCI Asia Pacific Index climbed 0.4 percent to 149.67 as of 10:50am in Tokyo. About five stocks gained for every three that fell.

The Nikkei 225 Stock Average rose 0.7 percent to 13,844.97. All other Asian benchmark indexes advanced.

Taipei opened higher this morning and is still on a positive slope, gaining 1.48%:

                       

Technorati Tags: Asia, Stock Market, fvarga

Dollar Rally Runs Out of Gas

After reaching 1.5283 in early Wednesday trade the dollar rally ran out of gas for the rest of the week as Jean Claude Trichet dismissed any possibility of  near term rate cuts causing a quick short covering rally in the EURUSD.

For the week however, the US data produced mainly  positive surprises suggesting that the economy may be faring far better than most analysts forecast.

The most impressive news on last week’s calendar was the sharp rebound in ISM Manufacturing report which  printed at 52.0 versus 49.1 expected. With services data which comprises the vast majority of US economic activity, squarely above the 50 boom/bust line, the arguments for an imminent US recession have become considerably less persuasive.

Nevertheless, next week may be a considerable challenge for dollar bulls as most of the US economic data is expected to be rather weak.

At posting time (11:15 - GMT+8  ), rates are:

EURUSD	1.5526
USDJPY	103.75
GBPUSD	1.9539
USDCAD	1.0062
USDCHF	1.0446
EURCHF	1.6218
EURGBP	0.7946
EURJPY	161.0822
USDTWD	30.884
AUDUSD	0.9459
NZDUSD	0.7699
USDSGD	1.3676
EURTWD	47.9505

 

Technorati Tags: Currencies, Forex, Rates, USD, EURO, fvarga