STUCK IN A RUT
As many have pointed out in recent weeks, as volatile and depressed the stock markets have been the last few months, they're really the side show to the main event, the on-going seizing of the global credit markets. This Bloomberg piece from Sunday makes the point in stark terms*:
While rates on everything from four-week Treasury bills to 30-year bonds fall to all-time lows, companies are paying an average 10.8 percent on their debt, up from 6.53 percent in January, according to Merrill Lynch & Co.’s U.S. Corporate & High Yield Master Index. The premium investors demand for lending to companies instead of the government rose to 8.85 percentage points yesterday, compared with 2.96 percentage points at the start of the year, the index shows..."
"The $8.5 trillion committed by the U.S. to rescue the
financial system hasn’t succeeded in unlocking credit markets
that seized up with the collapse of the subprime mortgage market
in August 2007.
AT&T Inc., the largest U.S. telephone company and a benchmark borrower in the corporate bond market, sold $1.5 billion of 6.7 percent notes last month that yielded 4.38 percentage points more than Treasuries, compared with 1.68 percentage points in an offering a year ago."
Tomorrow will be three months since the demise of Lehman Brothers, the event that many attribute as the point when the credit markets went from bad to really, really bad.
A quarter of the year has gone by with some historically extraordinary efforts by central bankers around the world to get credit flowing again at "normal" market rates. Looks like it may take a bit longer than we'd all like.
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