The Fed and LIBOR

If you want a better understanding of the present conundrum the Fed faces between rates, the credit crunch, and inflation, go read Bloomberg’s John M. Berry’s column form last week: Fed Rate Cut May Hinge on Where the Libor Goes

The money quote:

LIBOR — London
interbank offered rate — for one-month money, had hovered
around 4.66 percent in the first half of November, began a swift
rise. On Nov. 30 it reached 5.236 percent. Normally, Libor is
only slightly higher than the Fed’s lending-rate target, and if
a rate cut is likely within a couple of weeks, it may be lower
than the target

Part of the increase in Libor is undoubtedly related to
pressures in the interbank market toward year’s end. And some of
the current problem is due to large demands for dollar loans by
foreign banks.

This continuing widening credit market spreads makes a 50 bp cut less likely:


Courtesy of Northern Trust


Fed Rate Cut May Hinge on Where the Libor Goes
John M. Berry
Bloomberg, Dec. 3 2007

Headlines Justify Posture of Hawks but Details Favor the Doves and Call for Action
Asha G. Bangalore
Northern Trust Global Economic Research (PDF)

Category: Federal Reserve, Fixed Income/Interest Rates, Inflation

Irrational Exuberance

Category: Federal Reserve

Sector Performance Following Fed Cuts

Category: Economy, Federal Reserve, Technical Analysis

No, Pending Home Sales Index Did Not Rise

Category: Credit, Data Analysis, Real Estate

“Economics and Business” Books of the Year (Economist)

Category: Books

14,164.53* (Read it here first)

Category: Financial Press

Damn Spammers!

Category: Weblogs

How Big Is It?

Category: Credit, Derivatives, Real Estate

Housing Charts: Genesis of a Crisis

Category: Credit, Derivatives, Finance, Real Estate

SubPrime? So what?

I have long respected and enjoyed Jim Cramer, but jeez, could he have possibly been any more wrong than this?  Its one thing to be wrong about the future, but how about getting the present correct?

So Subprime Blows Up; So What, Says Cramer (Jim gives you the scoop on why the $500 billion market is no threat to
the market, even if it fully collapses. Added: July 16, 2007)

Geez, that makes 6,800 look good.

via ZackAttack (here)

Category: Credit, Derivatives, Video