US Yield Curve Now Flat Between 12-Months LIBOR And 10yr Treasury: US Banks Do Not Flinch, Yet

US Yield Curve Now Flat Between 12months LIBOR And 10yr Treasury: US Banks Do Not Flinch, Yet by Francesco Filia, Fasanara Capital

12-months US Libor squeezed higher in anticipation to changes in US regulation on prime money-market funds, kicking in on October 14^th. Critically, it is unclear whether such technical factors will fade, partially or in full, once the new regulation kicks in and uncertainties clear. Coincidentally, rates on short-dated govies also moved higher in past weeks in anticipation of potential rate hikes by the FED.

In addition to the tighter financial conditions in the inter-banking market that the squeeze on swap rates implies, to domestic and foreign users (as also reflected by TED spreads and OIS/Libor spreads being the widest...