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What is EuriBor? And what does it tells?

Discussion in 'Financial Futures' started by philipatt, Jan 28, 2008.

1. philipatt

Hello friends,
Lots of people ask this, So i want to know myself as well.

What is EuriBor?
And How do we calculate.. What does it tells if 3 month Euribor rises or falls..?

2. hrokling

http://www.investopedia.com/terms/e/euribor.asp

The rate of interest at which panel banks borrow funds from other panel banks, in marketable size, in the EU interbank market.

In other words, this is the rate at which participant banks within the European Union money market will lend to another participant bank in the EU money market. Because banks involved with Euribor are the largest participants in the EU money market, this rate has become the benchmark for short-term interest rates.

3. philipatt

Yes, But i mean i read alot as 3 Month EuriBor is down and all that.. So what does it tells...?

Interest rates expectations to fall or rise for Euro..

4. Wood474

Simply, economic definitions aside, euribor is calculated as such: 100 - interest rate = 3 month euriobor price. So, if front month 3 mth euribor (March 08) is quoted as 95.670 it implies that the implied interest rate for March 08 is 100 - 95.670 = 4.33%

Obviously there are further out months quoted, so you get the implied rate for the curve. In a nutshell, Interest rate down, euribor up and vice versa.

5. WharfRat

Spreads between interbank rates (like LIBOR and EURIBOR) and short-term government rates (like T bills) are an indication of short-term liquidity/funding conditions in the banking system. When those spreads pop up (like they did in August 07 and then again in Dec 07) it indicates decreasing liquidity.

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