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Credit Crisis: The 4th Wave?

The TED spread is starting to rise again and is back above 1.0 for the first time since the beginning of May. Here is the TED Spread from Bloomberg. The spread is still far below the previous three waves, but well above the normal level (below 0.5). And from the WSJ: European Bank-Lending Anxiety Returns Tensions in Europe's short-term lending markets are on the rise again, repeating a pattern that central bankers had hoped to end by pumping in hundreds of billions of dollars in recent months. The pressure partly reflects an end-of-quarter effect, as banks hoard cash to make sure their finances look healthy when they report second-quarter results. But it also demonstrates that fears of further write-downs and possible failures aren't going away. more... http://calculatedrisk.blogspot.com/2008/06/credit-crisi...

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ozymandius (1000+ posts)

Thu Jun-26-08 11:53 AM Response to Reply #14

15. more on the credit burn

Edited on Thu Jun-26-08 11:53 AM by ozymandius Credit Market Worries Rising? (excerpt) the Short View column in the Financial Times, keying off adverse trends in the credit default swaps market, sounded positively anxious: Fears are mounting that conditions are set to deteriorate markedly in credit markets. Lehman Brothers warned this week that spreads on credit default swaps, which track the cost of insuring corporate debt against default, could soon spike beyond the levels seen at the time of the Bear Stearns rescue in March. Spreads tightened a touch on Wednesday as the market hoped the £4.5bn ($8.9bn) secured by Barclays augured well for raising capital in the banking sector. However, the trend since mid-May has been disturbing. The Markit iTraxx Europe index of investment-grade debt has crept back up from the recent low of 66 basis points to 96bp today. Across the Atlantic, the CDX has moved over the same period from 91bp to 130bp. Sentiment has soured as investors have become more worried that the fallout from the subprime debacle is increasingly infecting the real economy. A data-rich week has offered little solace. Private sector output in the eurozone has contracted for the first time in five years, while consumer confidence and housing metrics in the US continue to be dire. Sharply rising input prices that can’t easily be passed on will further crimp business profit margins, increasing the risk of corporate failure. Adding to the woe are more ratings downgrades for the monoline bond insurers, crucial cogs in the financial system. So while none of this is definitive, the signs of instability are worsening. All it might take is a couple of mind-focusing bad developments in short succession for investors to start running for cover. edit: http://www.nakedcapitalism.com/2008/06/credit-market-wo...

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Ghost Dog (1000+ posts)

Thu Jun-26-08 02:18 PM Response to Reply #15

51. Sharply rising input prices:

German Import Prices Have Biggest Gain in 18 Years June 26 (Bloomberg) -- German import prices rose the most in almost 18 years in May, adding to signs of increasing inflation pressure in Europe's largest economy. Prices gained 2.4 percent from April, when they climbed 0.9 percent, the Federal Statistics Office in Wiesbaden said today. That's the biggest gain since September 1990. Economists expected an increase of 1.5 percent, according to the median of 16 forecasts in a Bloomberg News survey. A surge in oil prices to a record $139.89 a barrel on June 16 has pushed up inflation and increased pressure on companies to pass on higher costs, even as a stronger euro makes imports more affordable. The European Central Bank has said it is ready to raise borrowing costs from a six-year high next month. ``Inflation pressures are much stronger than expected,'' said Thorsten Polleit, chief German economist at Barclays Capital in Frankfurt. ``It's mainly due to developments on commodity markets. Prices will continue to rise.'' From a year earlier, import prices increased 7.9 percent after rising 5.7 percent in April, the statistics office said today. That's the strongest annual increase since November 2000. Energy costs increased 10.1 percent in the month and imported crude oil was 13.3 percent more expensive, today's report showed. The price of oil has increased 43 percent this year, draining the purchasing power of companies and consumers. The euro has gained 6.6 percent against the dollar over the same period. /... http://www.bloomberg.com/apps/news?pid=20601068&sid=aYM...

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DemReadingDU (1000+ posts)

Thu Jun-26-08 12:14 PM Response to Reply #14

21. The TED Spread

Edited on Thu Jun-26-08 12:17 PM by DemReadingDU The willingness of banks to LEND TO EACH OTHER is truly measured by the TED spread. The TED spread is the difference between 3-month LIBOR and 3-month Treasuries. The significance of this spread is that it represents the spread between the rate charged for lending to a bank and the rate charged for lending to the government. It effectively measures the perceived credit risk of banks relative to the government (the credit risk premium). That spread generally indicates how much FEAR is in the banking system (about the banking system ITSELF). Even though the media doesn't focus much attention on this indicator (AS IT SHOULD), it should not be dismissed or taken lightly. It is very serious. You can find the rate for 3-month LIBOR and 3-month Treasuries at this link: http://www.bloomberg.com/markets/rates/index.html Written by Bernard on 2007-12-01 08:33:06 http://www.rgemonitor.com/blog/roubini/229674 edit to add link for the TED Spread chart http://www.bloomberg.com/apps/quote?ticker=.TEDSP:IND

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Roland99 (1000+ posts)

Thu Jun-26-08 08:45 PM Response to Reply #21

120. not pretty.

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