by Calculated Risk on 10/22/2008 02:28:00 PM

First on the LIBOR from Bloomberg: Libor for Dollars Slides After Fed Offers Cash to Mutual Funds

The London interbank offered rate, or Libor, that banks charge each other for such loans dropped 29 basis points to 3.54 percent, the British Bankers' Association said. ... The Libor-OIS spread, a measure of cash scarcity, fell below 250 basis points for the first time since Sept. 30.

``The funding situation has improved and will probably continue to improve, but what will surprise is the length of time it will take,'' said Patrick Bennett, a currency strategist at Societe Generale SA in Hong Kong.

The yield on 3 month treasuries: 1.00%, down slightly from 1.09% (slightly worse)

A good sign would be if the daily volatility subsides, and the yield moves up closer to the Fed funds rate, or about 1.25%.

The TED spread: 2.50 down from 2.74 yesterday (BETTER)

The two year swap spread from Bloomberg: 107.25 slightly from 102.5 (slightly worse)

Activity in the Treasury's Supplementary Financing Program (SFP). This is the Treasury program to raise cash for the Fed's liquidity initiatives. If this program slows down borrowing, I think that would be a good sign.

Here is a list of SFP sales. No new announcements today, but this will take some time. No Progress.

The A2P2 spread is 4.45 Tuesday, up from 4.18 for Monday. Worse.

During a recession, this spread usually increases because the risk of default for lower quality paper increases. However the recent values (over 400 bps) are far in excess of normal. If the credit crisis eases, I'd expect a significant decline in this spread.

Industry contacts. I just spoke with one of my contacts, and they still cannot obtain a loan for an excellent acquisition. When this deal is completed that would be a good sign. No improvement yet.

This is a disappointment, and it looks like it will take some time for the credit markets to thaw. Meanwhile the economic and earning news is still grim ...