Libor

Is there a way to gauge where Libor is going, or should I say, explain what factors will cause its future outcome?

supply & demand

Well yeah, I was hoping for a more techinical proof

Eurodollar futures give the market’s complete view of forward LIBOR rates (edit remember convexity adjustment though).

My understanding is that the best prediction of the shape of the LIBOR curve tomorrow is that it will be the same as today’s (and thus all the imputed forward rates will be the same). If there were any reliable way to predict otherwise, it would have been arb’d away. So I think one answer to your question is “no, or else someone else would already have profited from it”, or perhaps “the consensus estimate is that Libor is going nowhere”. Or maybe you mean the rates for absolute (rather than relative) dates. If you want to know what changes the December 13 2007 rate will be going through, then simply shift today’s yield curve and read the new rate. (This is “rolling down the yield curve”, assuming it’s upward sloping.) But if you want to know what the estimate is for the 3m rate tomorrow, the estimate is that it will be the same as today’s rate.

agree with JoeyDVivre. eurodollar futures.

EDSFs (euro$ futures) are what actually trades; LIBOR rates are targets. Much like the target fed rate vs actual treasuries and contracts.

What? Not true. I guess I would like to tell you why it’s not true except that it’s just not. LIBOR is a rate at which London banks offer unsecured loans to other banks. A Eurodollar deposit is a dollar deposited outside the United states. The ED futures contract has a settlement process that uses the LIBOR rate. Further, there is even a LIBOR futures contract (but not as liquid as ED and for 1 month LIBOR not 3-month).

skiloa Wrote: ------------------------------------------------------- > EDSFs (euro$ futures) are what actually trades; > LIBOR rates are targets. > > Much like the target fed rate vs actual treasuries > and contracts. and thye Fed target rate is not a target rate for treasuries. There is a Fed Funds target rate that is the target rate for the Fed funds rate and basically guides Fed open market operations. There is also a Fed funds futures contract which you would think would be on the Fed Funds rate (as an ED contract is a contract on an interest rate), but unfortunately it’s not but on some weird averaging process of the actual Fed Funds rate.

skiloa Wrote: ------------------------------------------------------- > EDSFs (euro$ futures) are what actually trades; > LIBOR rates are targets. > > Much like the target fed rate vs actual treasuries > and contracts. nice how you posted “you guys have no clue” in another fixed income thread and then go 0/2 on very basic interest rate concepts.

Edit: Nevermind