Today the interbank cost of borrowing US dollars for 3-months fell below 50 basis points for the first time in recorded BBA history. Accordingly, many economists have concluded that the strategies employed by global central banks over the last two years are working and that the systemic risks that existed post-Lehman are now gone. Although a bit thawed, it is clear that the credit markets have not yet returned to normal. Given that USD Libor is still roughly 30 bps above the Fed Funds rate, it appears that parity may be achieved well before year-end. Does this mean that Libor will continue to fall until Fed Funds parity is met or is USD Libor in a terminal decline?

Here is where global banks actually borrowed 3-month US dollars versus the BBA’s .49625%:

Australian Bank: .28%; UK Bank: .32%; UK Bank: .44%; Japanese Bank: .55%; Swedish Bank: .65%; Belgian Bank .80%

Here is a summary of the day-to-day changes in the global money markets:

US O/N LIBOR: .22688% vs. .22313% Friday
US 1M LIBOR: .28750% vs. .28500% Friday
US 3M LIBOR: .49625% vs. .50188% Friday
EUR 3M LIBOR: .89188% vs. .89875% Friday
GBP 3M LIBOR: .91438% vs. .92463% Friday
3M USD/OIS Spread: 30.33 vs. 30.09 Friday
3M EU/OIS Spread: 46.90 vs. 47.45 Friday
3M GBP/OIS Spread: 49.49 vs. 49.76 Friday
Effective Fed Funds: 16 vs. 15bps Friday
TED: 31.57 vs. 31.93 Friday
DXY: 78.42 vs. 78.65 Friday
VIX: 23.09 (Fri.) vs. 23.43 (Thurs.)
CVIX: 13.10 (Fri.) vs. 13.41 (Thurs.)

——————————————————————————
Amegy Bank N.A.

Kenneth Hogan
Vice President
Corporate Foreign Exchange

Phone: +1 713 235 8896
Fax: +1 713 235 8817
Bloomberg: AMEG
e-mail: kenneth.hogan@amegybank.com

4400 Post Oak Parkway | Houston TX 77027
——————————————————————————
General Disclaimer:
If this message contains a report: opinions, estimates and projections in this report constitute the current judgment of the author as of the date of this report. They do not necessarily reflect the opinions of Amegy Bank and are subject to change without notice. Amegy Bank has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. Prices and availability of financial instruments also are subject to change without notice. This report is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy in any jurisdiction. Furthermore, past performance is not indicative of future results. If you would like to stop receiving this report, please reply to this message with the following in the subject line: Unsubscribe. Amegy Bank N.A., 4400 Post Oak Parkway, Houston, Texas 77027

“Messaging Security” made the following
annotations on 07/27/09, 06:49:49
——————————————————————————
CONFIDENTIALITY NOTICE:

The information contained in this ELECTRONIC MAIL transmission is confidential. It may also be privileged work product or proprietary information. This information is intended for the exclusive use of the addressee(s). If you are not the intended recipient, please inform us. Any unauthorized, disclosure, dissemination, distribution [other than to the addressee(s)], copying or taking of any action because of this information is strictly prohibited. As we cannot guarantee the genuineness or completeness of the information contained in this message, the content set forth herein are not legally binding.
IRS Circular 230 Disclosure:

Amegy Bank N.A. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. federal tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or tax-related matter[s].

==============================================================================