Back in the credit-crisis days, you could often find signs of impending problems in esoteric corners of the credit markets. As banks began to run into trouble, for instance, things like swap spreads, TED spreads and LIBOR rates began to surge.
The stock market eventually caught on when the problems became too big to ignore, and the rest is history. That’s why it’s worth noting that three-month LIBOR rates are on the rise. At 0.73% today, it hasn’t been higher in seven years.
 Is this a sign of rising credit stress? Most analysts say “No,” and that it’s more closely tied to new money market fund regulations.
Those regulations apply to funds that own short-term corporate paper, rather than government securities alone. The net effect of the new rules is to drive money OUT of funds that invest in moderately riskier corporate securities, and IN to those that invest exclusively in govvies.
But it is worth watching to see if this move gathers steam. Sometimes the simplest explanation isn’t necessarily the correct one. And regardless of why LIBOR is rising, the effect is to make it somewhat more expensive for corporations to borrow money – a negative influence on markets, all else being equal.
