The retired benchmark based on banks' estimates of their unsecured borrowing costs, replaced by SOFR and other transaction-based rates.
LIBOR was a survey, not a market. Panel banks submitted where they thought they could borrow, and those submissions set the rate on hundreds of trillions of dollars of contracts. Manipulation cases and the collapse of unsecured interbank lending killed it, and US dollar settings ended in mid-2023.
It still matters historically because LIBOR contained bank credit risk. Its spread over risk-free rates was a stress gauge, a role now played by less direct measures.
Example: a legacy loan referencing 3-month USD LIBOR now references CME Term SOFR plus a fixed spread adjustment of 26.161 basis points, the ISDA fallback figure for that tenor.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.
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