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Why is the 3 month USD Libor dropping?

Why is the 3 month USD Libor dropping?

The Fed’s comment on the 30th of January that it will remain patient before increasing its base rates in 2019, sent 3-mth USD Libor downwards. Previously on the 20th of December, the benchmark reached its higher level in more than a decade, as the market was expecting a Fed rates increase.

Additionally, since late December investors have been increasing their cash in USD money market funds by some USD95bn of which about half is invested in Financial Paper, adding some additional pressure. Concerns about slowing growth of the US economy and the unresolved trade dispute, will result in more investors heading for liquid assets.

How does the 3 month USD Libor drop affect the USD ECP issuance?


According to CMDportal data, following Fed’s comment on the 30th of January, the outstanding amount in USD Euro Commercial Paper went up by 0.51% day on day.

When on the 7th of February, 3 month USD Libor recorded its largest daily drop in a decade, of 4 bps, the market responded by increasing USD ECP outstanding by 0.69% day on day.

Overall and since Fed's comment, 3 month USD Libor has dropped by 4.3 bps, while the USD ECP outstanding amount has increased by 1.47%.

 

 
 

Who are the largest Dealers In the USD ECP market?

Rabobank led the USD Money Market Share League Table for 2018, capturing close to 21% of the market. ING followed closely, with 17%. Credit Agricole CIB, Citi and Barclays are also credible players. For more information on the USD Money Market Share League Table, click here and scroll down to page 6: CMD Awards 2019.

The competition has already started heating up as we look ahead to CMD Awards 2020. Dealers should make sure that they claim their trades using the Claim Trade tool to climb up the League Tables. Alternatively, you could send your trade list in xls format at analysts@cmdportal.com and we will process it.

How can reproduce the USD ECP figures?


It is fairly simple to reproduce the above figures. Use the Data Sheet tool and filter via the following:

Report Type: By Instrument Currency
Report Output Type: Outstanding
Report Currency: USD
Start Date: Set your desired Start Date
End Date: Set your desired End Date
ISIN: XS
Instrument Type: CD; CP
Currency: USD
Security Category Group: Vanilla

For more information on the CMDportal’s tools contact us at analysts@cmdportal.com.
 



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