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Tuesday, December 02, 2008

Credit Crisis Indicators

by Calculated Risk on 12/02/2008 11:10:00 AM

Yesterday saw a stunning flight to treasuries across the board.

A2P2 Spread Click on graph for larger image in new window.

The 10-year yield fell to a record low of 2.72%. The yield has fallen further this morning (currently at 2.70%)

The graph shows the 10 year yield since 1962.

The yield on 3 month treasuries is 0.05% (bad). This is essentially zero!

Here are a few other indicators of credit stress once again suggesting little progress over the last few days.

  • The three month LIBOR has increased to 2.21% from 2.15% last week. The three-month LIBOR rate peaked (for this cycle) at 4.81875% on Oct. 10. (slightly worse)

    TED Spread
  • The TED spread: 2.16 up from 2.13 last week. (slightly worse)

    The TED spread is stuck above 2.0, and 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 around 0.5.

  • A2P2 Spread
  • The A2P2 spread decreased to 4.85 from a record (for this cycle) 5.86 on Friday (probably related to the holiday). This is way too high. (Bad).

    This is the spread between high and low quality 30 day nonfinancial commercial paper. If the credit crisis eases, I'd expect a significant decline in this spread - and the graph makes it clear this indicator is still in crisis.

    Two Year Swap
  • The two year swap spread from Bloomberg: 108.75 essentially unchanged. (unchanged). This spread peaked at near 165 in early October, so there has been significant progress, but I'd like to see this below 100.

  • For the LIBOR, the TED spread, and the two-year swap, there has been clear progress - but there is still a ways to go. For the A2P2 spread (and all treasury yields), the markets are still in crisis.