It is a common question, but definitely a common answer that when is the credit crisis going to end? Credit spreads have been rising and are getting ever more volatile, and this is a tell-tale sign that I monitor the waning of the credit crisis.
US banks are going to roll over almost US$800 billion in medium term debt in the next 16 months and a lot of it is in 2-3 year floating rate notes. With the rising credit spreads, this means that they will have to sell more assets or raise very expensive equity capital. Banks will get into trouble more quickly than you can think of, if they cannot raise capital, sell assets or borrow money due to perceived distress.
Roughly, typical corporation now are paying 315 basis points from a low of 70 basis points more than a similar longer-dated US Treasury. And in the case of high yield market, the spreads on average, have risen from 240 basis points to over 860 basis points. The spread between LIBOR and the Fed fund rate stood in excess of 700 basis points, from historical average of 350 basis points. LIBOR may be the most important rate at all, as so many contracts, including US and European mortgages are based upon. Hedge funds, mortgage banks, large and small corporations and a host of interest rate sensitive investment deals are based on LIBOR.
As a result, I spotted a continued weakness in high grade new issue supply this month – the weakest since 2003. YTD the high grade supply was S$543 billion, about US$112 billion behind last year's pace. High yield and leveraged loan supply also remained muted as only US$5 billion priced.
Subscribe to:
Post Comments (Atom)
4 comments:
What a brilliant piece of note!
two-year swap spread,was last quoted at 100.00 basis points,
compared with 99.50 basis points late Tuesday. LIBOR edged up to 2.81375 percent from
2.81313 percent on Tuesday.Indexed Swap rate grew to 79.12500
basis points, up 1.112 basis points from Tuesday. 10-year swap spread was last quoted
69.75 basis points, a tad wider than 69.50 basis points on
Tuesday. was reported. i regcon bank will have every tocky road ahead as the are gasping for capital to keep a float. TRUST once lost difficult to rocover. Just as MR BADAWI, the wide spread of giving votes and receive promise has warp into singularity theorist by DR stepend hawkibg
sorry for typo error......
just to add, in Mlaysia , the finance mister solution is . lets “pray it will come down.”
Post a Comment