Two of the most widely used short-term benchmarks used in the money markets -- Treasury bill rates and LIBOR -- have been criticized recently for being too volatile, too narrow, and too detached from the reality in the broader short-term funding markets. Treasury rates have been pushed to abnormal lows, while the London Interbank Offered Rate's woes have been well-documented recently. LIBOR's thin reporting base, European focus, and voluntary "honor-system" reporting have market participants discussing alternatives.
Today's Wall Street Journal writes "New York Rate System to Challenge Libor", which discusses plans by prime brokerage behemoth ICAP Plc to "launch a new measure of U.S. interest rates in response to concerns about the accuracy of the current [LIBOR] benchmark."
WSJ writes, "The rate system, which is being set up by ICAP PLC, a London broker-dealer with offices in New York, is aimed at giving banks and market participants a new gauge of what it costs banks to borrow money. ICAP intends to start publishing the rate, which will be called the New York Funding Rate, or NYFR, as soon as next week, said Lou Crandall, chief economist at Wrightson ICAP."
Other short-term index alternatives are being discussed as well, such as money fund averages, commercial paper indexes, or other broader money market benchmarks. Crane Data, of course, is in the short-term benchmark business with our Crane 100 Money Fund Index and suite of Crane Money Fund Indexes, Brokerage Sweep Indexes, and nascent collections of bank savings and CD averages.
We would be happy to discuss the pros and cons of various benchmarks, and would be happy to share sample of our monthly Crane Index product, which contains a number of different money market indexes and averages.
