Posted on 02/04/2009 8:46:24 PM PST by TigerLikesRooster
Libor slide hits a wall
Bad news from bank sector keeps rates, spreads aloft
By Laura Mandaro, MarketWatch
Last update: 5:25 p.m. EST Feb. 4, 2009
A previous version of this story gave an incorrect range for the Libor-swaps spread before the credit crunch got underway. The story has been corrected.
SAN FRANCISCO (MarketWatch) -- The sharp improvement in Libor rates since late last year has stalled as anxiety about banks' health has crept back into this key lending market.
The London interbank offered rate, or Libor, rose to 1.235% Wednesday from 1.09% on Jan. 13. Over the same period, the spread between Libor and rates on overnight index swaps, another indicator of banks' ability to access funds, has stuck to about 0.99 of a point. That's far higher than it was before the start of the credit crunch.
Higher rates and wider spreads mean banks are more hesitant to lend to each other, keeping pressure on their funding costs, and indirectly, the rates they charge homeowners and corporate lenders. Libor's behavior also suggests the Federal Reserve and other central banks have more work to do as they try to rekindle consumer borrowing by lowering rates.
(Excerpt) Read more at marketwatch.com ...
Ping!
later
Inflation forcast due to looming ‘stimulus’ package?
Bump for later
The Fed has extended until Oct 2009 all of the goofy alphabet-soup swap programs.
This is a clear indication that we’re nowhere close to being out of the woods yet.
Plenty of foreign currencies are cratering, the Russians are being watched carefully for another default as back during LTCM days, etc, etc.
And now, it is becoming very clear to people that Pres. Obama’s economic team did not have a plan ready to go on 1/20/09, they don’t have a plan now, and they’re not up to speed on the pile of dog vomit that Congress is voting upon.
Other than rather loud and public posturing on the trade front to make Obama's union goon constituency happy.
True.
But the markets are digging through the proposals and finding tons of problems.
For example, the “bad bank” proposal. NO ONE has yet come up with a realistic model for answering the question “What shall we pay for the bad paper?” No one - Republican or Democrat.
There are politicians who keep pointing at the RTC model from the S&L days, but that’s a bogus comparison. In that case, the FDIC swooped in and just *took* the assets and notes. They didn’t pay anything. There was no negotiation, there was no discussion, there was no compensation. They just clumped up all the crap paper over in the RTC, cleared out the banks, sold the remaining assets off to other banks and then went on to peddle the crap out of the RTC, where any price was a gain on those assets because they had paid nothing for them.
They keep searching for magic solution while there isn't one, but they are still in denial over it. Just keep up with the appearance of working out a solution, churning out one proposal after another. Until they are all exhausted and have no other choice to acknowledge the reality.
In terms of collective psychology , we are still in strong denial phase. The very initial phase of psychological reaction to a crisis. It will take a while because great majority of them have never experienced really serious crisis. This thing is way off the chart for them.
Face it..., politicians NEVER face reality until they are OUT OF OFFICE! Until then..., it is ALWAYS someone else's fault!!!
Yes, that’s true. The worse problem is that too many people keep missing the elephant in the room: we’re in a deflation. When deflations really get going, nothing can be done to stop them. There is no way to force people or businesses to spend money when they reach the threshold of thinking “If I can put off the purchase for as long as possible, it will be cheaper when I come back.”
Once the consumer public reaches that conclusion, Katy bar the door, down we go.
I believe we’re quickly approaching that point. The data on the collapse of consumer spending and the rapid increase in real saving is showing that consumers are pulling in their purchases. The data out of Proctor and Gamble as well as Phillip Morris show that even on the very quotidian things, consumers are slowing down their purchases.
I was listening on the cisco conference call today and John said that order growth went like this in Q2: November, down 9%. December, down 11%. January, down 20%. Small business and consumers are leading the way on order contraction. The slowdown in sales, first seen in the US and EU financial sector, spread first to all other sectors in those two markets, and has now gone world-wide. There is no more sales growth anywhere in the 160+ countries into which cisco sells equipment/services.
Thanks for the ping.
I put off getting the pool resurfaced - and saved about $4,000. I'm still stunned how cheap the bid came in... and I'm putting off buying a new central AC unit. At the micro level your "put off the purchase for as long as possible" is happening now.
Bad news for folks whose ARMs are tied to Libor.
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