This week, traders appeared to be cashing out of bets that the Libor was headed lower, while a prominent short-term rates analyst called for it to continue falling and eventually hit 22 basis points.

The market for euro dollars, which is an arena for traders to express their expectations for the Libor's next movements, was quiet on Wednesday, but there was heavy activity in the market the day before. Roseanne Briggen, an analyst at IFR, a unit of Thomson Reuters, said she saw traders exiting bets that the Libor would fall further. They sold euro dollars and eurodollar futures, with one trader selling over 10,000 contracts at a single point during the trading day.

"This is clearly a bet that three-month Libor does not decline below 0.25 percent," Briggen wrote in commentary on Tuesday.

But Alex Roever, head of short-term fixed income strategy at JPMorgan, said in a note to clients he expected the Libor to reach 22 basis points (0.22 percent), amid a scramble for collateral in the repurchase market and a flood of available cash following a change to the US government's deposit insurance assessment methods.

"We estimate that most Libor panel banks are able to borrow in the US markets 3-5 basis below posted levels in one-month to six-month Libor," Roever wrotes.

"Posted levels are falling, but at a lagging pace. Although there is some psychological resistance on three-month Libor around 25 basis points (the rate the Federal Reserve pays on reserves), that barrier didn't stop one-month Libor from breaking through in late-March, and we suspect roughly half the members of USD Libor panel can already fund at that level or below."

Roever said he thought Libor could hit 22 basis points over the coming month.

The three-month dollar Libor was 0.27375 percent on Wednesday, unchanged from Tuesday.

Trading was light on Wednesday, Briggen said, as more traders headed for early holidays ahead of the approaching Easter weekend.