The direction of interest-rate derivatives suggests that the rate that banks charge for loans in dollars in London may rise further as financial institutions remain reluctant to lend, reports Bloomberg. The difference between the rate of three-month loans in London relative to the overnight index swap rate (the Libor-OIS spread) is 88bp, near the year high of 90bp reached April 21. The London interbank offered rate, or Libor, for dollars climbed on speculation that lenders have manipulated the rate to curb borrowing costs. The British Bankers’ Association said last week it would speed up a review of the daily Libor-setting process and ban any member providing misleading quotes.
