USD LIBOR 2002-2008: predictability in times of credit tightening and expansion - USD LIBOR 1-week autocorrelations, year-by-year comparison

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Written by Forex Automaton   
Tuesday, 13 January 2009 12:15
Article Index
USD LIBOR 2002-2008: predictability in times of credit tightening and expansion
USD LIBOR s/n-o/n autocorrelations, year-by-year comparison
USD LIBOR 1-week autocorrelations, year-by-year comparison
USD LIBOR 1-month autocorrelations, year-by-year comparison
USD LIBOR autocorrelations, 3-month and longer terms, year-by-year comparison
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USD 1-week LIBOR autocorrelation, day time scale, rising rates USD 1-week LIBOR autocorrelation, day time scale, falling rates

Fig.3: Autocorrelation of logarithmic returns in the historical 1-week USD LIBOR. Top: as measured in the years of rising interest rates: 2004, 2005, and 2006. Bottom: as measured in the years of falling interest rates: 2002, 2003, 2007, and 2008.

Interest rates on 1-week terms in times of aggressive interest rates policy, Fig.3, show a lot of predictability: markets go through steps of interest rate hikes separated by certain intervals, as seen from the positive peaks around certain time-lag values. The time lags of 30 days or so seem somewhat strange though since the 7-week regular FOMC meeting interval corresponds to 70 business days. One is not so sure of the future when it comes to softening the interest rates policy, as seen from the bottom panel of Fig.3. The positive correlation is much subdued although some of it remains in the immediate vicinity of the zero-lag peak, that is on short time intervals. The "bipolar disorder" feature figures prominently again in the bottom panel, characterizing the nervousness of the money markets.



Last Updated ( Monday, 04 January 2010 12:42 )