The lack of clarity surrounding the Fed’s attempts to ease dollar funding stresses, combined with its effect on LIBOR and the 2021 LIBOR transition, is creating high demand for short-term interest rate options – to the tune of over $400 billion work of futures contracts in May 2020. Factors on which the spread may tighten beyond its current narrowing of 40 basis points include a return to liquidity in the commercial paper market and the LIBOR rate’s recent decline.

Read more via Bloomberg.