by Calculated Risk on 10/29/2008 12:51:00 PM

While we wait for the Fed ...

LIBOR declined 5 basis points today to 3.42 percent.

The yield on 3 month treasuries declined sharply to 0.60% from 0.77% as investors wait for the Fed. (Worse)

The 3 month yield was close to zero for a few days, so this is still a significant improvement from the worst of the credit crisis. Usually the 3 month trades below the Fed Funds rate by around 25 bps, so this is reasonable if the Fed cuts rates to 0.75%, but the yield is too low if the Fed cuts 50 bps to 1.0%.

The TED spread: 2.82, up from 2.69 (Worse) This is way too high, but significantly below the peak of 4.63 on Oct 10th.

I'd like to see the spread move back down to 1.0 or lower - at least below 2.0.

The two year swap spread from Bloomberg: 115.88 down from 123.25 (slightly better). This spread peaked at near 165 in early October, so there has been significant progress, but I'd like to see this under 100.

Activity in the Treasury's Supplementary Financing Program (SFP). This is the Treasury program to raise cash for the Fed's liquidity initiatives. If this program slows down borrowing, I think that would be a good sign.

Here is a list of SFP sales. No announcement today. no progress.

The A2P2 spread is 4.55 up from 4.35. Worse.

During a recession, this spread usually increases because the risk of default for lower quality paper increases. However the recent values (over 400 bps) are far in excess of normal. If the credit crisis eases, I'd expect a significant decline in this spread. The high for the A2P2 spread was 4.66, and there has been little progress here.

No thaw today.