Lately, things have become a little crazy in the interbank markets.
The chart above shows how US dollar LIBOR rates changed between September 12-19. On the September 17th, LIBOR went mad. The overnight rate jumped from 2.1 percent to 6.4 percent. Since then, LIBOR has calmed down a little. However, the US dollar LIBOR rate has shifted up at all maturities.
And what about Sterling LIBOR?
Sterling interbank rates also went a little wild. However, the madess in the overnight market subsided as the Bank of Englnad pumped in liquidity. The Bank might have overdone it a little at the very short end of the market; the overnight rate on September 19 was a little lower than it was on September 12th.
Nonetheless, the sterling LIBOR yield curve has shifted upwards, suggesting that the credit crisis has worsened since the Fed pulled the plug on Lehman.