LIBOR is the rate on dollar-denominated deposits,
also know as Eurodollars, traded between banks
in London. The index is quoted for one month,
three months, six months as well as one-year
periods.
LIBOR is the base interest rate paid on deposits
between banks in the Eurodollar market. A Eurodollar
is a dollar deposited in a bank in a country
where the currency is not the dollar. The Eurodollar
market has been around for over 40 years and
is a major component of the International financial
market. London is the center of the Euromarket
in terms of volume.
The LIBOR rate quoted in the Wall Street Journal
is an average of rate quotes from five major
banks. Bank of America, Barclays, Bank of Tokyo,
Deutsche Bank and Swiss Bank.
The most common quote for mortgages is the
6-month quote. LIBOR's cost of money is a widely
monitored international interest rate indicator.
LIBOR is currently being used by both Fannie
Mae and Freddie Mac as an index on the loans
they purchase.
LIBOR is quoted daily in the Wall Street Journal's
Money Rates and compares most closely to the
1-Year Treasury Security index.
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