Elevated LIBOR creates opportunities in floating rate bonds

What investors need to know about these bonds in a rising rate environment

Time to read: 3 min

We believe the recent spike in US dollar LIBOR (LIBOR) presents opportunities in floating rate bonds. As noted in the recent blog (What’s up with US dollar LIBOR?), we at Invesco Fixed Income believe three factors have driven LIBOR higher:

  • The US Federal Reserve (Fed) has pushed monetary policy rates higher with its latest hike in March.
  • Demand has fallen for short-term credit instruments due to potential corporate repatriation following last year’s tax reform.
  • Markets expect an abundant supply of US Treasury bills (T-bills) through 2019, given projected budget deficits.

Investors in floating rate bonds could benefit from this dynamic