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LIBOR 3M and 1M. Rates on January 13. “The curve is starting to turn.” Commentary by Rafał Mundry

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The WIBOR curve is beginning to reverse, economist Rafał Mundry wrote in social media. In this way, he referred to the fact that after Friday’s reading, the three-month WIBOR rate is lower than the monthly one.

The economist Rafał Mundry drew attention to the current level of WIBOR rates on Twitter. “The WIBOR curve is beginning to reverse,” he wrote.

The point is that currently the 3M WIBOR rate (three-month WIBOR, 6.92%) is lower than the 1M (monthly, 6.93%) WIBOR rate, while the 6M (six-month) and 1Y (annual) WIBOR rate – according to the economist – may fall below the value of WIBOR 3M.

“Normally, the longer the period for which we borrow money, the higher the interest rate, because the greater the risk. interest rate cutsthen the mechanism is reversed” – explained Rafał Mundry.

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WIBOR affects the amount of loan installments

WIBOR together with the bank’s margin are components of the loan interest rate, thus affecting the amount of monthly installments. Some banks use the WIBOR 3M rate, which means that the interest rate on the mortgage loan is updated every three months from the moment the loan is launched. In the case of WIBOR 6M, the interest rate is updated every six months.

The 3M and 6M WIBOR rates include probable increases or decreases in interest rates that may occur in the next three or six months. A decrease in WIBOR means a decrease in loan installments.

interest rates PAP

During its first meeting this year, the Monetary Policy Council decided to keep the NBP interest rates unchanged. The main, reference interest rate is 6.75 percent.

PKO BP economists expect the first interest rate cuts to take place in 2023. Their base scenario predicts a decline of 50 basis points. This would mean that the reference rate will go down to 6.25% this year.

“FRA contracts indicate that by Eo23 (end of 2023 – editorial note) the NBP rates will fall by approx. 50bps (less in the chart, because we show the average quote from the week). The market usually overestimates the range of interest rate change cycles. In our opinion, current valuations may materialize and -50bps is our baseline scenario,” they tweeted on Wednesday.

Representatives of this bank, in the reply sent to us in the second half of December, indicated that they assumed two reductions of 25 basis points each.

Main photo source: Shutterstock

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