Another day closer to the release of the bank ‘stress test’ brings us
another leak in the morning papers and today reveals that 10 of the 19
banks MAY need to raise capital and/or convert preferred to common in
order to improve the TCE ratio. The relevance of the outcome is only
important for those specific banks and their stakeholders as the US govt
will not let another Lehman occur with those tested. As part of this
implied govt guarantee, LIBOR rates continue to drop as US$ 3 mo fell
for a 25th straight day and is now below 1% and the TED spread is at the
lowest level since June ’08 but in a sign that banks are still reluctant
to lend to each other for any period of time other than very short term,
the spread between 1 mo LIBOR and 3 mo LIBOR is still elevated at 59 bps
vs around 10 bps in calmer times. The $ index is at a 6 week low as the
fear trade unwinds and any improvement to global growth will be more
pronounced outside of the US.

Category: MacroNotes

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

2 Responses to “LIBOR continues its drop”

  1. Chief Tomahawk says:

    Peter, you ought to include (on stress test posts) a photo of Sean Penn’s Spiccoli character from “Fast Times at Ridgemont High” just to underscore the thoroughness of the metric.

  2. CNBC Sucks says:

    “In a sign that banks are still reluctant to lend to each other for any period of time other than very short term, the spread between 1 mo LIBOR and 3 mo LIBOR is still elevated at 59 bps vs around 10 bps in calmer times. The $ index is at a 6 week low as the fear trade unwinds and any improvement to global growth will be more pronounced outside of the US.”

    Boo-hoo, Peter. You are an even bigger egghead than Ritholtz. US asset valuations have already proven that they do not need smoothly functioning credit markets to remain the bloated representations of their overweight populace. The Treasury can print as much money as it damn pleases and the US dollar will be propped up by the rest of the world to make sure their warehouses (they don’t even use vaults anymore!) full of American paper money continue to be worth something, and to make sure they can continue to export things to us for more paper money. And Americans couldn’t care less about how global growth will be more pronounced outside the U.S.: American Idol is on the final four contestants, we got SportsCenter, summer is almost here. Most of the unemployed will be transformed to the underemployed, and the rest will be forgotten.

    But kudos on a good analysis anyway.