by Calculated Risk on 11/14/2008 01:03:00 PM

Once again, as economic activity dives off a cliff, here is another daily look at a few credit indicators ...

LIBOR increased again, for the 2nd day in a row, after falling for 23 straight days:

The London interbank offered rate, or Libor, for three-month dollar loans edged above 2.23% from just below 2.15% Thursday, the British Bankers Association reported.

The three-month LIBOR was 2.15% yesterday and the rate peaked at 4.81875% on Oct. 10. (slightly worse)

The yield on 3 month treasuries fell to 0.145% from 0.18%. (slightly worse).

With the effective Fed Funds rate at 0.35% (as of yesterday), this is probably somewhat in the right range. At some point, I'd like to see the effective Fed funds rate close to the target rate (currently 1.0%) and the 3 month yield within 25 bps of the target rate.

The TED spread: 2.09, up from 1.98 (slightly worse)

The TED spread is back above 2.0 again, and still too high. The peak was 4.63 on Oct 10th. I'd like to see the spread move back down to 1.0 or lower. A normal spread is around 0.5. From reader Kai using data back to 1986: "The average TED spread is 58bps, but the median TED spread is 42bps and the non-crisis (i.e. less than 100bps spread) median is 37.8bps."

The two year swap spread from Bloomberg: 112.75, esentially unchanged (unchanged). This spread peaked at near 165 in early October, so there has been significant progress, but I'd like to see this below 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. It has been a few days without an announcement from the Treasury... (no progress).

Weekly Fed Balance Sheet.

Click on graph for larger image in new window.

The Federal Reserve assets increased $139 billion this week to $2.214 trillion.

Note: the graph shows Total Factors Supplying Federal Reserve Funds and is an available series that is close to assets.

The A2P2 spread is down to 4.4 down from 4.47, and down from 4.72 two weeks ago. (slightly better).

This is the spread between high and low quality 30 day nonfinancial commercial paper.

The Fed is buying higher quality commercial paper (CP) and this is pushing down the yield on this paper (0.65% yesterday!) - and increasing the spread between AA and A2/P2 CP. So this indicator has been a little misleading. Also the recession is creating concern for lower rated paper. Still, if the credit crisis eases, I'd expect a significant decline in this spread.

If anything these indicators suggest a small step backwards ...