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LIBOR - current LIBOR interest rates | Negative Interest Rates - Real world application

Hi all

LIBOR is mentioned throughout the CFA curriculum - I am just trying to understand the real world application. I wonder if someone would kindly shed some light on this?

Having seen the euro LIBOR rates from overnight to 12 months - they are all negative, i.e. -0.21514 %. I don’t understand why they are negative and if these negative rates are used in investments?

If there is a class of bonds with a spread of 100 bps over 12 month euro LIBOR. Does this mean that it will pay interest of -0.21514% + 1%?

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Can anyone shed some light please?

Jim125 wrote:
Hi all

LIBOR is mentioned throughout the CFA curriculum - I am just trying to understand the real world application. I wonder if someone would kindly shed some light on this?

Having seen the euro LIBOR rates from overnight to 12 months - they are all negative, i.e. -0.21514 %. I don’t understand why they are negative and if these negative rates are used in investments?

If there is a class of bonds with a spread of 100 bps over 12 month euro LIBOR. Does this mean that it will pay interest of -0.21514% + 1%?

Unless there’s a floor on the interest rate, yes.

Simplify the complicated side; don't complify the simplicated side.

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