LIBOR Flat

See: LIBOR.

The LIBOR flat is the LIBOR rate that has no extra spread on top (extra monaaaayyyy). Because it’s so “pure,” it’s used as a starting point to calculate other interest rates…a base rate, as some would say. Because of the lack of spread, and because LIBOR is such a big deal globally, it’s also generally the best short-term lending interest rate around.

For those new to LIBOR, it’s the London Interbank Offered Rate, the interest rate that global banks use to lend to each other. LIBOR is kind of like the Fed Funds rate in the U.S., except that the Fed Funds rate is set by the Fed, whereas LIBOR is more au naturale, as it’s a result of supply and demand of funds on the international market.

See: LIBOR Curve.