Submitted by Read Closely (not verified) on January 16, 2009 - 4:35pm.
Curious how you came up with a 50bp increase for lenders? Historically hasn't the 3-month LIBOR & CP rate trade in relation to each other with 3-month LIBOR higher by about 10-15bps? This quarter there was a huge disconnect between these two rates due to the government interaction to credit crisis, which drove down CP rates to extremely low levels while LIBOR remained high. Isn't this the reason why they are also going to change the basis to 3-month LIBOR minus 13bps to account for this historical difference? I don't see how this rate should be historically any different & be a net benefit to the lenders?
Also the reason for including all post-2000 loans are because all loans prior to that date were based on T-Bill.
50bp?
Curious how you came up with a 50bp increase for lenders? Historically hasn't the 3-month LIBOR & CP rate trade in relation to each other with 3-month LIBOR higher by about 10-15bps? This quarter there was a huge disconnect between these two rates due to the government interaction to credit crisis, which drove down CP rates to extremely low levels while LIBOR remained high. Isn't this the reason why they are also going to change the basis to 3-month LIBOR minus 13bps to account for this historical difference? I don't see how this rate should be historically any different & be a net benefit to the lenders?
Also the reason for including all post-2000 loans are because all loans prior to that date were based on T-Bill.