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Politics : High Tolerance Plasticity
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To: jim_p who wrote (17040)10/8/2002 9:30:51 AM
From: jim_p  Read Replies (1) of 23153
 
U.S. Credit Markets Freezing Up?
Stress in the U.S. corporate bond market is spreading, which could expedite a Fed rate cut.

Following a brief reprieve in the late summer, the corporate bond market is again feeling the pressure from swooning equity markets. Spreads versus government bonds have surged and new issuance has dried up. Now, the pressure is hitting bank bonds and commercial paper, where spreads have started to widen. The TED spread has not moved much yet, but these market trends are reminiscent of 1998 and late 2000; intensifying financial stress forced these spreads sharply wider, ultimately requiring the Fed to come to the rescue. The Fed has shown that it will react quickly when the credit markets freeze up. Thus, the probability of an emergency Fed easing is rising.
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