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Negative rates and Libor floors
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Negative rates and Libor floors

Richard Conway Social Housing March 2020
Following the Bank of England’s emergency rate cut last week, markets are pricing in an increased likelihood of negative interest rates in the UK.

Overnight index swap (OIS) markets are suggesting a 15% chance of a further 25bps rate cut, to be announced at the March 26th BoE meeting – which would bring rates to 0%.

For housing associations, negative rates may have several different impacts, depending on the nature of borrowing, as the table below illustrates.

Further rate cuts on the horizon

We recommend that you:

  • Review security positions on standalone swap exposures
  • Review loan agreements for Libor floors, particularly in the case of those holding standalone swaps against floating rate loans

Please get in touch with a member of the team if you would like to discuss further.

 

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