>>> Bloomberg <<<
Bernanke Warming Prompts Record Company Debt as Libor-OIS Falls
By Dakin Campbell and John Detrixhe
April 27 (Bloomberg) -- Wherever you look, Federal Reserve Chairman Ben S. Bernanke’s efforts to repair global credit markets are showing signs of working.
The Libor-OIS premium that indicates banks’ reluctance to lend to each other fell to 0.87 percentage point on April 24, the lowest level since before Lehman Brothers Holdings Inc. collapsed in September, according to data compiled by Bloomberg. Companies have raised a record $468 billion in U.S. bond sales this year. Prices of the most senior portions of mortgage bonds backed by prime U.S. jumbo loans have climbed 24 percent in the past five weeks, according to London-based Barclays Capital.
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Banks are lending to each other again, after credit dried up in August 2007 when losses from subprime mortgages left financial institutions with securities and financial contracts they couldn’t value. They froze when Lehman filed for the biggest bankruptcy in history on Sept. 15. The TED Spread measuring the difference between the London interbank offered rate for three-month dollar loans and the Treasury bill rate rose as high as 4.64 percentage points Oct. 10.
Libor fell for 19 straight days, to 1.07 percent, the lowest since June 2003. That’s the longest streak since it fell 22 days starting Oct. 13, when central banks around the world offered as much dollar funding as required.
“The short-term markets are in much better shape because the U.S. government has done a lot to help,” said Barr Segal, a managing director at Los Angeles-based TCW Group Inc., which holds $90 billion in fixed-income assets.
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“The economy right now is in a healing process,” said Jonathan Basile, an economist at Credit Suisse in New York. “We’re stabilizing first. The rebound comes later.”
The Treasury yield curve measuring the difference between two- and 10-year yields is expanding, a signal investors expect growth and inflation to quicken. The gap widened to 2.05 percentage points on April 24, within one basis point of the biggest gap since Nov. 24. The curve averaged below zero in 2006 and the first half of 2007 as investors correctly forecast a recession.
“Time starts to heal things in this business, especially when you have a yield curve that is very steep,” said Donald Galante, chief investment officer and senior vice president of fixed income at MF Global Ltd. in New York, which provides trading execution and clearing services.
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I have to admit it's getting better
A little better all the time
(Can't get no worse)
I have to admit it's getting better, it's getting better
Since you've been mine
