JPY LIBOR 2007-2010: shorter maturities mean-revert, longer ones form trends

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Written by Forex Automaton   
Friday, 29 October 2010 11:44
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JPY LIBOR 2007-2010: shorter maturities mean-revert, longer ones form trends
JPY LIBOR autocorrelations
Correlations between JPY LIBOR maturities, spot/next and longer terms
Correlations between JPY LIBOR maturities, 1-week and longer terms, 1-month and longer terms
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Statistically significant patterns in the Japanese yen LIBOR time series have been discussed on this site in October 2008, based on a data set ending in summer 2008. The financial panic of 2008 that followed (I reserve the word "crisis" for a broader context) left its imprints on the Japanese yen, one of the world's primary funding currencies. The data presented here cover the period from August 16, 2007 (the day Countrywide Financial made the news, triggering a change in the US Fed stance) through July 30, 2010. I focus exclusively on autocorrelations within the yen LIBOR time series for various maturities, and on the cross-correlations between them. Surprisingly, the patterns are very similar to those of the 2008 report, despite the fact that the most dramatic movements in JPY LIBOR took place in fall of 2008 and were not analyzed previously.

LIBOR charts

History of spot/next JPY LIBOR 2007-2010 History of 1-week JPY LIBOR 2007-2010 History of 6-month JPY LIBOR 2007-2010 History of 12-month JPY LIBOR 2007-2010

Fig.1: Historical JPY LIBOR charts, top to bottom: spot/next, 1-week, 6-month, and 12-month maturity. Time axis is labeled in MM-YY format. The data covers the time range from 2007-08-16 to 2010-07-30.

The credit crunch of 2008 is seen in the charts as a series of spikes in the spot/next LIBOR and a more solid local maximum of LIBOR for longer maturities. Unlike the US dollar LIBOR, here it seems, at least from visual inspection, that spikes in the spot/next and weekly interest rates are preceded by rises in longer term rates and sit on top of broader peaks of the latter ones. In other words, one could say that peaks in 6-month and 12-month interest rates culminate in spikes of spot/next and weekly LIBOR. In case of US dollar, shorter maturities were seen to be the leaders, while being totally unpredictable on the basis on the longer ones.

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