Skip to comments.New Fears as Credit Markets Tighten Up
Posted on 03/09/2009 9:23:31 AM PDT by marshmallow
The credit markets are seizing up again amid new anxieties about the global financial system.
The fear and uncertainty that sent stocks to 12-year lows is now roiling the market for corporate bonds and loans, which have given back much of the gains they chalked up earlier in the year.
Short-term credit markets are still performing better than they did last year thanks to government programs to buy commercial paper and guarantee short-term debt. But Libor, the London interbank offered rate, a common benchmark interest rate, has crept up over the past weeks, from 1.1% in mid-January to 1.3% on Friday, reflecting banks' concerns about being paid back for even short-term loans. It is still well below its peak of 4.8% last October.
This time around, the economy is slipping deeper into a recession, and bond investors worry the government's repeated modifications to its financial-rescue packages are undermining the very foundations of bond investing: the right of creditors to claim their assets first if a borrower defaults. Without this assurance, bonds of even the most stalwart institutions are much riskier to own.
After what seemed like the beginning of a thawing of debt markets early in the year, sentiment has deteriorated, analysts say. The markets remain open only to the strongest companies. A rally in U.S. Treasury bonds last week reflects another bout of flight-to-quality buying. Junk bonds now yield 19 percentage points more than safe Treasury bonds, up from a 16-point spread in February, according to Merrill Lynch. The spread is still narrower than the 21-percentage-point premium reached last December, but any widening shows investors are becoming more fearful.
Part of the problem is that investors are still waiting for key details from the government about its plans to bolster U.S. banks and unfreeze the credit markets.
(Excerpt) Read more at online.wsj.com ...
What does it mean, credit markets are freezing up. Banks charging more to loan money or just not loaning money? The last so called freeze was just banks charging more.
This will bring the DOW to at least 4000 within six months. Or, the government will step in and change the mark-to-market accounting rules causing a ridiculous surge in the markets and then a TOTAL blowout. They simply will not let their incompetent friends fail so we all have to fail with them. A word does not exist in the English language to describe how foolish it all is.
We should enslave future children more, with more bailouts, financed by wealthy Chinese, Saudi Arabs, wealthy Americans...for the sake of...er...ah..the children.
Something like that.
(Insert plausible Federal Demo/Repub bull shite boob bait for Bubba’s here.)
I know this is not pertinant to this thread, but I do not know how the do a thread, and this one seemed appriorate enough.
Smack me later, lol.
"Say Johnny, Did you know your sister and all her friends are going to have to pay off these debts as prostitutes to Saudis and you'll get to watch them get raped as you will be castrated and rented out as a basically place guard for the Saudi Royal family?"
In other words, "We don't lend money to you unless we're pretty sure you can pay us back, and we're going to make you pay a pile of cash up front to make sure you've got a lot of money on the line."
Familiarize yourself with LIBOR (London Interbank Offered Rate). When the rate begins to creep up, it’s an indicator of an unwillingness to lend.
The lending referred to in this instance is between banks. That it’s beginning to freeze up again is an indicator of increasing lack of trust, from one bank to another.
This is after having improved the situation to some approximation of “normal” since the credit freeze last fall, due to various actions by the Fed, foreign central banks, and government funding by various governments.
There aren’t too many more rabbits left in the hat, so this one is potentially very problematic.
Ha ha ha ha. Pretty good!