by Bill McBride on 11/12/2008 12:57:00 PM
Wednesday, November 12, 2008
As economic activity falls off a cliff, here is the daily look at a few credit indicitors ...
The 3-month Libor rate fell to 2.13% from 2.18%, according to Dow Jones, the lowest level for the rate since Oct. 27, 2004.The three-month LIBOR was 2.18% yesterday. The rate peaked at 4.81875% on Oct. 10. (Better)
With the effective Fed Funds rate at 0.27% (as of yesterday), this is probably somewhat in the right range. At some point, I'd like to see the effective Fed funds rate close to the target rate (currently 1.0%).
The TED spread is under 2.0, but still too high. The peak was 4.63 on Oct 10th. I'd like to see the spread move back down to 1.0 or lower. A normal spread is about 0.5.
Here is a list of SFP sales. It has been a few days without an announcement from the Treasury... (no progress).
So far the Federal Reserve assets are still increasing rapidly. It will be a good sign - sometime in the future - when the Fed assets start to decline.
This is the spread between high and low quality 30 day nonfinancial commercial paper.
The Fed is buying higher quality commercial paper (CP) and this is pushing down the yield on this paper (0.65% yesterday!) - and increasing the spread between AA and A2/P2 CP. So this indicator has been a little misleading. Also the recession is creating concern for lower rated paper. Still, if the credit crisis eases, I'd expect a significant decline in this spread.
The LIBOR is down and the TED spread is slightly lower - so there is a little progress today, but there is still a long way to go.
Posted by Bill McBride on 11/12/2008 12:57:00 PM