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In the Wall Street Journal there is a list of money rate benchmarks. One of them is LIBOR swaps (USD), whose description is

LIBOR swaps are mid-market, semi-anual swap rates and pay the floating 3-month LIBOR rate.

So we have a variable rate which is LIBOR + X% and a fixed rate/swap rate which is Y% - what is the "libor swap rate"?

Rodrigo de Azevedo
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John D
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2 Answers2

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The libor swap rates show the fixed rate you would have to pay if you entered into a swap agreement where you received the floating 3-month libor rate.

From the link in your question:
Two Year: 0.478
Three Year: 0.549
Five Year: 0.842

For example, if I wanted to enter into a two year interest rate swap I would have to pay a fixed rate of 0.478 % for two years and in return I would receive interest payments based on the 3-month LIBOR rate (currently 0.4551 %). My interest payments would be fixed while the money I received from the swap would be variable based on the 3-month libor rate.

"Mid-market" refers to the value halfway between highest bid and the lowest offer.

Semi-annual means the swap settles interest payments every 6 months.

Drew
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Muro
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LIBOR rate swaps are common most among an international bank and a with a branch in another country, so say Company A is located in Kenya and Company B is in the US, A can borrow $100M from the US and B the same from Kenya and agree to swap assuming that A borrowed at a fixed rate of say 5% and B borrowed for say a 6 month LIBOR rate of maybe 4.2% which increases at a rate of say 0.5% above the prior 6 moth libor rate for time t being 5 years.A is the fixed rate payer and B is the floating rate payer.

kenmox
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