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Pimco Warns That a Misstep on Replacing Libor Could Be Costly

  • Transition to new Libor benchmark must be carefully managed
  • Mismanaged change risks favoring some markets over others
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FCA Says Libor Is Ending in 2021

Pacific Investment Management Co. says there will be consequences from being too complacent during the phasing out of Libor, the global borrowing benchmark that underpins more than $350 trillion of financial products.

“We strongly argue that a viable alternative needs to be entrenched before Libor is phased out, and that investors should consider there is a marginal risk that Libor ceases abruptly and unexpectedly,” Pimco’s William De Leon and Courtney Walker wrote in a note published Wednesday. “Our greatest concern is that a transition that is not well-scripted and fails to consider the potential impacts on all securities types threatens to favor certain market participants over others.”