This is from the April 7 issue of The New York Times, but we’ve continued in the same direction: “Credit Markets Are Showing Some Signs of Life”.
The TED spread is back down to the level it was at before the Lehmann bankruptcy. This measures the difference in default risk between very low risk government bonds (which can be supported by printing money) and very low risk corporate bonds.
But … the article also talks about mortgage rates falling, and while this is interesting to a lot of people, I find it economically illiterate to focus on it. The reason is that it’s a price: whether its going up or down is viewed as good depends on whether your more biased towards buyers or sellers. I think if you’re unbiased, you shouldn’t care about something like this.
That’s in contrast to spreads, where the benefits to buyers and sellers net out when you take the difference between two rates.
The piece closes with an opinion that’s worth thinking about:
“The question to ask is not whether credit markets have improved,” said Jeff Rosenberg, head of credit strategy research at Bank of America/Merrill Lynch. “The question is, what is the source of the improvement? Can credit markets function without significant government intervention? Indisputably, the answer is no.”
I don’t have an answer to that question.