http://www.sifma.org/blastemails/comMUNIcations/comMUNIcations-050610.html

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Three-month LIBOR rates head above 50 bps for the first time since last summer.  European debt fears seem to be the culprit, as opposed to the likelihood of a monetary policy shift.  When the trust among banks and sovereigns returns, LIBOR tends to track the Fed Fund target rate. (Bloomberg)

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The full letter to the Senate Banking Committee (WSJ), where the Fed Chairman touches on the reasons for not spinning off swap books from banks, echoing sentiments from Sheila Bair at the FDIC.  Major downfalls of a spin-off:  reduced regulation, reduced liquidity available in stressful times, and reduced competition with foreign banks.

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Not exactly a turn at the roullette wheel, but the University is switching from SIFMA to 67% of 1-Month LIBOR + spread  on its weekly floaters in a play to benefit from the current relationship between taxable and tax-exempt curves.  The benefits could be magnified by the potential for increases in marginal tax rates.  The projected interest expense will now be close to the fixed rate on their SIFMA swap minus the received spread on the basis swap (assuming 67% of 1M LIBOR approximates their weekly floaters). (Bloomberg)

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