LIBOR \u2014 the London Interbank Offered Rate \u2014 was a globally used benchmark interest rate at which major banks indicated they were willing to lend to one another in the interbank market. Published daily across five currencies (USD, GBP, EUR, JPY, CHF) and seven maturities (overnight to 12 months), LIBOR underpinned an estimated USD 300 trillion in financial contracts worldwide, from mortgages to derivatives.<\/p>\n
Each business day, a panel of major banks submitted the rate at which they estimated they could borrow unsecured funds. The highest and lowest submissions were excluded, and an average of the remaining rates was published by the ICE Benchmark Administration. This rate then influenced borrowing costs across countless financial products globally.<\/p>\n
LIBOR was phased out in 2023 following a major manipulation scandal in which banks were found to have submitted false rates to benefit their trading positions. Regulators moved to replace it with transaction-based benchmarks that reflect actual market activity:<\/p>\n
Currency<\/strong><\/th>\n| LIBOR Replacement<\/strong><\/th>\n | Administered By<\/strong><\/th>\n<\/tr>\n<\/thead>\n\n | USD<\/td>\n | SOFR (Secured Overnight Financing Rate)<\/td>\n | Federal Reserve Bank of New York<\/td>\n<\/tr>\n | GBP<\/td>\n | SONIA (Sterling Overnight Index Average)<\/td>\n | Bank of England<\/td>\n<\/tr>\n | EUR<\/td>\n | \u20acSTR (Euro Short-Term Rate)<\/td>\n | European Central Bank<\/td>\n<\/tr>\n | JPY<\/td>\n | TONA (Tokyo Overnight Average Rate)<\/td>\n | Bank of Japan<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n | LIBOR’s Relevance for Traders<\/h2>\nAlthough LIBOR is no longer active, understanding its history is important for traders working with older financial instruments, legacy contracts, or interest rate products. Many swap, loan, and bond contracts written before 2023 referenced LIBOR and have since been transitioned to successor rates.<\/p>\n LIBOR: What to Keep in Mind<\/h2>\nAs a precaution, traders reviewing historical financial data or legacy instruments should check whether the referenced benchmark has been transitioned. Contracts still using LIBOR-era language may now reference a different rate \u2014 always verify the current benchmark applicable to any interest rate product you are analysing.<\/p>\n Explore Interest Rate Markets<\/h2>\nBenchmark rates like SOFR and SONIA shape the cost of capital across global markets. Understanding them helps you interpret central bank decisions and their ripple effects on currencies and fixed income. Create your live VT Markets account or log in now to trade interest rate-sensitive markets.<\/p>\n Risk Warning:<\/strong> Trading CFDs involves significant risk and may not be suitable for all investors. Losses can exceed your initial deposit. Please ensure you fully understand the risks involved before trading.<\/p>\n","protected":false},"excerpt":{"rendered":" What Is LIBOR and Why Did It Matter? LIBOR \u2014 the London Interbank Offered Rate \u2014 was a globally used benchmark interest rate at which major banks indicated they were willing to lend to one another in the interbank market. Published daily across five currencies (USD, GBP, EUR, JPY, CHF) and seven maturities (overnight to Continue Reading<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[120],"tags":[109],"class_list":["post-61767","post","type-post","status-publish","format-standard","hentry","category-trading-glossary","tag-markets"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t |
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