Monday, January 05, 2009

Credit Crisis Indicators: Improvement

by Bill McBride on 1/05/2009 04:50:00 PM

  • The yield on 3 month treasuries has increased to 0.08%. I suppose this is an improvement (better than zero).

  • The three month LIBOR has decreased to 1.42%. The three-month LIBOR rate peaked (for this cycle) at 4.81875% on Oct. 10. (improved)
    The London interbank offered rate, or Libor, for three-month dollar loans may hold near the lowest level in 4 1/2 years as central banks inject money into economies and financial companies to combat the credit squeeze.

    The rate was at 1.42 percent...
    Imagine all those adjusted rate mortgage loans tied to treasuries or even the 3 month LIBOR? The rates are looking pretty good!

  • The TED spread is at 1.34, sharply lower. (improved)

    The TED spread was stuck above 2.0 for some time, but has been steadily moving lower over the last few weeks. 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 around 0.5.

    A2P2 Spread
  • The A2P2 spread has plunged to 1.92%. This peaked at 5.86 after Thanksgiving. (better).

    This is the spread between high and low quality 30 day nonfinancial commercial paper. Right now quality 30 day nonfinancial paper is yielding close to zero. This may be holiday related, but this is significant decline.

  • The two year swap spread from Bloomberg: 77.75. (Improved). This spread peaked at near 165 in early October, so there has been significant progress, and the swap is finally well below100.

    It appears the Fed is finally getting some rates down ... the A2P2 spread decline is worth watching.