, Columnist
The $14.2 Billion Cost of Spiking Libor
Even with bond yields at record lows, costs are rising for some borrowers.
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Most benchmark yields have plunged to record lows this year. But there's one important exception: the dollar London Interbank Offered Rate, or Libor, which has shot up to the highest level since 2009.
This matters because as much as $6.9 trillion of debt is pegged to this rate, including some mortgages, student loans and corporate loans, according to Goldman Sachs analyst estimates in an report dated Monday. Floating-rate debt that's pegged to Libor requires borrowers to pay more as the rate rises. So the 0.2 percentage point increase in three-month Libor since the beginning of this year theoretically translates to an extra $14.2 billion of interest expense by all the borrowers with loans pegged to this rate.