Libor's true colours
Short-term Libor rates have surged, reflecting reluctance by banks to lend to each other in the current market turmoil. This has caused a dislocation in the short end of the curve, and created problems for those using swaps referenced to Libor. Duncan Wood reports
Like the serial killer who is described by shocked former colleagues and neighbours as a quiet, seemingly pleasant man, Libor has managed to hide its true nature from the banking industry for more than 20 years. During that time, there have been short-lived episodes of stress when the rate spiked upwards, but its history has typically been one of calm and stability - so Libor's violent eruption in August came as a nasty shock. Funding desks and structurers now say there is a question mark over
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