Misstep on Libor alternative could be costly: Pimco

New York

PACIFIC Investment Management Co (Pimco) says there will be consequences from being too complacent during the phasing out of Libor, the global borrowing benchmark that underpins more than US$350 trillion of financial products.

"We strongly argue that a viable alternative needs to be entrenched before Libor is phased out, and that investors should consider there is a marginal risk that Libor ceases abruptly and unexpectedly," Pimco's William De Leon and Courtney Walker wrote in a note published on Wednesday. "Our greatest concern is that a transition that is not well-scripted and fails to consider the potential impacts on all securities types threatens to favour certain market participants over others."