Credit Crisis Indicators: Some Progress

[girl gone mad]

by CalculatedRisk

* LIBOR declined today from Bloomberg:

"The London interbank offered rate, or Libor, for three month loans in dollars slid 0.16 point to 3.03 percent, the 15th consecutive drop, according to the British Bankers' Association."

The rate peaked at 4.81875% on Oct. 10.

* The yield on 3 month treasuries declined slightly to 0.42% from 0.48%. (slightly worse)

Usually the 3 month trades below the target Fed Funds rate by around 25 bps, so this is too low with the Fed funds rate at 1.0%. However, the effective Fed Funds rate is even lower (0.36% yesterday), so a 3 month yield of 0.42% is in the right range. I'd like to see the effective funds rate closer to the target rate.

* The TED spread: 2.60, down from 2.70 (Slightly better) This is way too high, but significantly below the peak of 4.63 on Oct 10th.

* The two year swap spread from Bloomberg: 120.00 up slightly (slightly worse). This spread peaked at near 165 in early October, so there has been significant progress, but I'd like to see this under 100.


* The A2P2 spread is at a record 4.72 up from 4.69. Worse.

The Fed is buying higher quality commercial paper (CP) and this is pushing down the yield on this paper - and increasing the spread between AA and A2/P2 CP. So this indicator is a little misleading right now. Still, if the credit crisis eases, I'd expect a significant decline in this spread.

The LIBOR is down and the TED spread is off a little, but the A2P2 spread is at a record high probably because of the Fed buying CP - so there is some progress.

http://calculatedrisk.blogspot.com/2008/10/credit-crisis-indicators-some-progress_31.html

[HowHasItComeToThis]

1. WHERE IN "H" IS THE 700 BILLION

JUST MORE REPUBLICAN EXTORTION

[depakid]

2. In case you hadn't noticed, some of that money is looking like it's going into foreclosure relief

and some has gone into equity shares, which the federal government is probably going to make some money on.

I know it's difficult for some after the past 8 years (15 if you include Clinton and the Republican Congress) -but it would behoove us all not to be so knee jerk, and to try to view things with an eye toward the complexities of the situation.