Joe,

Money costs money: swap is simply exchanging cash flows, while LIBOR
contains the cost of borrowing/lending money. LIBOR has costs for liquidity,
while swap doesn't. And apparently 1Y liquidity is priced at around 70bps.

Regards,
Micha


2009/2/4 Joe W. Byers <ecjbosu@aol.com>

> This may be outside this discussion group but you finance junkies might
> like this.
>
> The term structure Rate curve is really interesting lately.  The one year
> libor swap and one year money market differ by about 70 basis points.
> The data is below.  I am searching for a reason for this difference.
> The forward rates derived from this curve take a big dip one year out.
>
> 1 WEEK  0.351%
> 1 MONTH 0.445%
> 2 MONTH 0.949%
> 3 MONTH 1.234%
> 4 MONTH 1.460%
> 5 MONTH 1.600%
> 6 MONTH 1.776%
> 7 MONTH 1.827%
> 8 MONTH 1.881%
> 9 MONTH 1.935%
> 10 MONTH        1.981%
> 11 MONTH        2.033%
> 12 MONTH        2.084%
> USD IR Swap 1Y  1.316%
> USD IR Swap 2Y  1.600%
> USD IR Swap 3Y  1.955%
> USD IR Swap 4Y  2.244%
> USD IR Swap 5Y  2.457%
> USD IR Swap 6Y  2.615%
> USD IR Swap 7Y  2.757%
> USD IR Swap 8Y  2.866%
> USD IR Swap 9Y  2.951%
> USD IR Swap 10Y 3.031%
> USD IR Swap 12Y 3.162%
> USD IR Swap 15Y 3.299%
> USD IR Swap 20Y 3.340%
> USD IR Swap 25Y 3.329%
> USD IR Swap 30Y 3.328%
>
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