Credit loosening up

By now many of us have become familiar with the TED spread – considered an important indicator of how willing banks are to lend money to other banks. The TED spread measures the difference between the 3-month London Interbank Offered Rate (Libor) and the 3-month U.S. Treasury borrowing rate. The higher the spread, the tighter the credit. A little over a month ago, the spread was 1.04 percent. Last Friday, it reached a record high of 4.65 percent, which had people who follow this stuff freaking out. Since then, it’s been steadily dropping. Now it's at 3.57 percent. So what exactly does this mean? Two views, courtesy of CNN.Money:

"Things have improved from the doomsday scenario that we saw last week, but it is by no means suggesting that it is ok," said Michael Cheah, senior portfolio manager at AIG Sun America.

"Until you start to see the 3-month Libor rate see a more pronounced move, I don't think we are out of the woods," said said Kenneth Naehu, managing director and head of fixed income at Bel Air Investment Advisors. "But we are seeing signs of improvement."



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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
 
Mark Lacter, business writer and editor was 59
The multi-talented Mark Lacter
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