credit mkts recovering as per target, page-23

Aren’t we missing something here – RHG prospectus will have assumed a spread of their average weighted lending rate less LIBOR plus a spread.
Attention so far has focused on the spread RHG will pay above LIBOR.
However, LIBOR is in itself a floating rate (same as BB’s in Australia) and the LIBOR spread above Treasuries has blown out of late.
As such, RHG’s funding rate will blow out on two fronts - the margin about Treasuries which LIBOR has increased, plus the margin above LIBOR that RHG will need to pay.
Only protection for RHG on the LIBOR front will be if they have in place CCIRS for the foreign currency part of the borrowing program.