Monetary Policy Report submitted to the Congress on February 27, 2008, pursuant to section 2B of the Federal Reserve Act
Figure of one-month Libor minus OIS rate, 2007-08. Data are plotted as a curve. The curve starts at about 7 basis points in January 2007 and remains at about that level until early August, when it begins a sharp increase that reaches about 90 basis points in early September. The curve then declines over the next several weeks, reaching about 20 basis points in late October. In mid-November, the curve begins rising sharply again and reaches about 110 basis points in early December. It begins to fall in mid-December and reaches about 10 basis points in mid-January of 2008. Later in January, it then trends higher, to about 30 basis points in February.
Note: The data are daily and extend through February 21, 2008. An overnight index swap (OIS) is an interest rate swap with the floating rate tied to an index of daily overnight rates, such as the effective federal funds rate. At maturity, two parties exchange, on the basis of the agreed notional amount, the difference between interest accrued at the fixed rate and interest accrued through geometric averaging of the floating, or index, rate.
Source: For Libor, British Bankers' Association; for the OIS rate, Prebon.