Key rate rises

claudio

While stocks turned higher, moves in the credit markets were more ominous. The benchmark London Interbank Offered Rate, or LIBOR, that banks charge to lend to one another rose sharply Tuesday, making it more expensive and difficult for consumers and businesses to borrow money. In addition, credit card debt and more than half of adjustable-rate mortgages are tied to LIBOR, so an increase isn't welcome for many consumers.

LIBOR for 3-month dollar loans rose to 4.05 percent from 3.88 percent on Monday. LIBOR for 3-month euro loans, meanwhile, rose to 5.27 percent, from 5.22 percent Monday.

lisa

biorjin

Two market indicators showed the price of borrowing for banks remaining high - a sign that banks are nervous about lending to other banks. These indicators are "at levels that indicate the money markets are still locked up," said Van Order.

 

One gauge, the "TED spread," showed high prices of loans between banks. The TED spread measures the difference between three-month Libor and the three-month Treasury borrowing rates and is a key indicator of risk. The higher the spread, the bigger the aversion to risk. On Tuesday, the spread retreated to 3.04%, after surging to 3.53% - its highest level in more than 25 years.

 

On Sept. 5, the TED spread was only 1.04%.

 

Furthermore, the difference between the Libor and the Overnight Index Swaps rose to a fresh record high 2.46% from 2.20% Monday, according to data reported by Bloomberg.com. The Libor-OIS "spread" measures how much cash is available for lending between banks, and is used by banks to determine lending rates. The bigger the spread, the less cash is available for lending.

 

The Libor, or the London interbank offered rate, is a daily average of what banks charge other banks to lend money in London. Larkin compared the Libor "the dial on the engine of the car," showing how much power the economy has. "And right now it is indicating that the car is severely overheating."

 

The 3-month Libor rate, at 4.05% Tuesday, has been trending higher for some time as the European economy has stalled. The rate has stayed above 3% consistently during the past month - a level not seen since the start of this year.

 

The overnight Libor rate jumped to an all-time high of 6.88%, according to the British Banking Association, which has been keeping records since 1984.

 

The European economy saw continued signs of weakness Tuesday. After a plunge in the value of Irish bank stocks, the Dublin government announced it would guarantee all deposits in Irish banks.

 

In addition, the Belgian bank Dexia had to be rescued by the government, and the Russian stock markets had to suspend trading after suffering heavy losses early in their session.

 

http://money.cnn.com/2008/09/30/markets/bondcenter/credit_markets/index.htm?postversion=2008093008 

lisa

Thanks, 宝马！ 我也是听了你上次的建议开始关注这个 TED 指标。 它要是下不去， 就像头顶的宝剑一样随时可能掉下来。手里的 put 也不敢随便抛掉。