Market participants should understand that the official sector has done everything it can to stabilize and strengthen LIBOR. Without the intervention of U.K. authorities, LIBOR would be in a weaker state today. But that balancing act has grown increasingly difficult. As time has passed, some banks have grown more resistant to public-sector entreaties to remain on the panels.
Around the turn of the year, though, investor concerns about the fiscal situations of many governments, including those of some populous states, resulted in increased yields on municipal bonds relative to Treasury bonds as well as a widening of credit default swap spreads for a number of states.