Could tax reform be behind the libor mystery?

Rise in libor has no easy answers

Libor has risen 0.6 percentage points above the Fed funds rate compared to 0.1 pp at the start of the year, which is the highest spread since 2009.

It's usually a sign of short-term funding strains and a possible run on the bank. Normally, it rises with other short-term funding rates but this time, it's climbed solo.

That has almost everyone scratching their heads. But it could be a side effect of the US tax bill.

Zoltan Pozsar, an analyst at Credit Suisse, says a reform known as the Base Erosion Anti-Abuse Tax, which aims to prevent U.S. multinational companies from paying less tax by increasing their costs at home and paying extra income to their foreign affiliates, is now penalizing the U.S. branches of foreign banks who relied on short-term borrowing from their headquarters overseas, by making those debt payments taxable.

The WSJ has more.