The London Inter-bank Offered Rate (LIBOR) is the U.S. dollar borrowing rate for high quality banks among one another, outside the U.S.
Swap Rates: The fixed interest rate in a swap contract where two parties have agreed to exchange fixed rate and floating rate payments based on a notional principal.
LIBOR is commonly used as the floating rate in swap agreements.
LIBOR Swap Rate Curve: Rates at future time periods to convert fixed rates to floating rates and floating rates to fixed rates.
The swap rate curve may be a better basis for the market yield curve than the government bond yields because:
The swap market is not regulated by governments, so swap rates are more comparable across different countries where foreign and domestic investors may receive different tax treatment.
The swap market may be unaffected by changes in demand for government bonds in the repurchase (or "repo") market.
Theoretically, the swap curve reflects bank credit risk.
The swap market has more maturities with which to construct a yield curve than the government bond market.
