Crisis Note 2008-2: What's LIBOR Got To Do With It?
LIBOR has been making the news over the past month or so: first it was over concerns it was artificially low due to banks not reporting their true borrowing rates to BBA (a lie, as Bloomberg called it), and more recently, about creating an American version of LIBOR.
c) The new floor on discount rates is 13-15% (assuming realistically conservative scenarios). Due to competition between the new hedge funds, I don't think discount rates widen any more. Pricing scenarios might change, however, as assets deteriorate further. It might thus be safer to buy riskier Category B assets close to these yields than "low risk" high grade assets.
d) Within Category B, I only like short front pays, and certain types of LCFs and Mezz bonds with low $ prices, where severe cumulative losses have already been priced in.