Is the rising LIBOR-OIS spread a sign of increasing risk?

The regulatory regime that applies to US money market mutual funds is changing significantly in mid-October. The side effect of this change has been a notable increase in bank funding costs (i.e. higher LIBOR-OIS spreads). While they are relevant for US credit investors, these recent developments tell us nothing about market concerns around bank solvency.

See Chris' post, The law of unintended consequences for a more detailed discussion on the topic.

 

 
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