Friday, February 26, 2010

US Corporate Bonds Spread

Click on the graph for bigger size

TED spread (calculated as the 3 Month LIBOR rate minus the 3 Month T Bill rate) has historically averaged between 30 bps to 50 bps. In 2008 they reached as high as 465 bps but the latest reading is below 20 bps.

BBB – AAA spread (99bps) is back to its historical average from a high of 526 bps. AAA – Tbill and BBB – Tbill are back to 2001 – 2004 levels (520 and 619 bps). Given that Federal Fund rate is at 0% whereas between 2001 to 20004 it varied from 100 bps to 225 bps.

All this just confirms that the credit market is back to pre-crises level.

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