January 13, 2009
That TED Sure Is A Funny Fellow (And Worth Keeping An Eye On)
"The difference between the London interbank offered rate, or Libor, that banks say they charge each other for three-month loans in dollars and the yield on the three-month Treasury bill, fell 12 basis points to 98 basis points today. The so-called TED spread last closed below 100 basis points Aug. 15. Dollar Libor dropped to 1.09 percent today, the lowest level since June 2003."
"The three-month dollar Libor is still 84 basis points above the Federal Reserve’s target, compared with an average of 12 basis points in the year before the crisis began. The spread was 332 basis points on Oct. 10, less than a month after the collapse of Lehman Brothers Holdings Inc."
First Published: January 13, 2009 7:15 AM
Comments from "Plugged In" Readers
oooh, this is a great entry to discussing the Fama-French cost of capital model. Get's me all tingly inside.
Posted by: Rubicon at January 14, 2009 11:13 AM
I'm pretty sure you're thinking of Modigliani-Miller, Rubicon. (Fama-French are the factor model asset price guys, with their research on market "anomolies" - small firm, december/january effect, etc.) Not that it matters - the policy makers are clueless, and are making an absolute mess of this.
Pretty funny to watch, though. Sad to contemplate the implications, but the die is cast, so.....
Despite the fall of TED, we are getting the first of the "Depression" prints: retail sales -11.7% real fall yoy, as pointed out by diemos in another thread today. Just wait until consumers have to start saving in an economy that's 72% consumer spending! Going from spending 110% of income to 90% is going to be a real shock, made even worse by falling income.
Posted by: LMRiM at January 14, 2009 12:31 PM