SPREAD ‘EM: Credit Prices Bump Along
There’s nothing wrong with consistency — as long as the consistent “thing” is good. Just ask Mariano Rivera.
Well, credit spreads remain Rivera-like. Sure, they continue to bump along in a narrow band, but that band is a good one.
Consider the TED spread, which measures the difference between three-month Treasurys and the three-month Libor rate. The TED is residing today at 22.79 basis points.
TED SPREAD
The TED has stayed below 25 basis points for about two and a half months. Not since early 2007 has the TED spread stuck to such an appealing range.
The Libor-OIS spread, which measures the difference between the three-month Libor rate and the anticipated average of the federal funds rate, is also sticking within a positive range. The spread is at 13 basis points today, and has consistently remained below 15 for weeks on end.
LIBOR-OIS SPREAD
You cannot look at these spreads and not see them playing in the favor of the banking industry. It’s cheap money, after all, and that’s what bankers like.
