Are The Credit Markets Predicting Another August?

Posted by John Carney, Oct 18, 2007, 2:26pm

Okay. That's about enough time buried in quarterly financial reports for us. To cheer ourselves up after spending too much time with Bank of America's investment banking division and JP Morgan's commodities trading desk, we decided to turn to the broader markets.

But for some reason we're not exactly cheered up. The yields on short term treasuries have been shrinking all week, while commercial paper rates climb. The spread between three month t-bills and Libor keeps getting wider. The last time we saw this kind of action was in August and September. During that "summer credit crunch."

Even the good news is wrapped in bad news. While overall commercial paper issuances grew, asset backed commercial paper issuance shrank for a 10th straight week. The Entity doesn't seem to be inspiring much confidence.

Implied volatility is down from its highs, but sits right about where it was at the end of July. Oh, and we just ran the charts and noticed that the major stock indexes are right about where they were before the August turmoil hit. Well, actually, the NASDAQ is a bit higher. But we can't help feeling that this is all a bit spooky.

One question. Everyone keeps focusing on Friday as the anniversary of 1987's market crash. But wasn't that on a Monday following a week of losses and volatility? Which is to say, shouldn't we be thinking not so much about Friday as Monday?

Whew. We're in a gloomy mood today. We're blaming it on "market dislocations."

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Comments

Posted by , Oct 18, 2007 2:58PM

All good though, 'cause Random Banker's CFC calls are going to kick major booty, and then all of us filistines will have to bow to him....

Posted by inIT4the$, Oct 18, 2007 3:00PM

(BN) Rhinebridge Commercial Paper SIV Says May Be Unable to Pay

second one (maybe) today...

Posted by , Oct 18, 2007 3:29PM

The Entity. I like it.

Posted by anonymous, Oct 18, 2007 3:31PM

take a look @ the ABX .. not pretty.

Posted by Anonymous, Oct 18, 2007 4:23PM

If the Entity doesn't fly maybe Chuck will.

Posted by just venting, Oct 18, 2007 4:41PM

you know what i really hate? when some idiot trader lets me know that a company "just filed their 8K" like thats supposed to fucking mean something.
does that happen to anyone else?
i mean shit at least say the company filed AN 8k, and act like you have a brain in your head. what do you have it confused with a 10k? "they just filed their 10K" would make some sense at least. what effing 8K are you talking about dimwit? this could be almost anything. don't say it like there is a specific item you were expecting and they finally filed it.

fuck. sorry.

Posted by WTF, Oct 18, 2007 4:49PM

Why do you need to sign into foxbusiness.com all of a sudden? it is so popular they need to keep people out? rrarr

also does anyone think its weird that CNBC keeps running ads on fox business?

Posted by , Oct 18, 2007 5:36PM

the credit markets are very different now than they were before the 'credit crunch' happened. there's a flight to quality and even there liquidity is a major concern. a lot of major banks have shaken up their credit desks, and post-firings they have the new traders just trying to clean out the books before year end. there's no logic to the market movements in credit, and nobody wants to explain that they just got burned dabbling in a market that shifted the wrong way with no real view on anything. obviously the credit markets are in terrible shape but the only real concern is ABS now-i'd check back in a month or two...if you're worried about another crunch i don't think its possible, people would have to have taken massive exposure (which they haven't) and the market has to be trading (which it isn't)

Posted by Chris, Oct 18, 2007 10:36PM

@Just Venting,

You know what I hate? When an analyst has something resembling a *clue*, then lacks the balls to follow through. As a *trader* who occasionally notices the various "K's" out there, my question to you is this - why don't you just watch everything on your own?

There are thousands of you, and where does it get us, on average? 50-50...and that's if you work for the buyside.

Sure. You've seen "traders" come and go. Well, I've seen "analysts" come and go as well. Trust me, I'd pick a trusty revolver and an entrenching tool over an analyst any day on the Street. I can count on the former to fire at least 6 good shots before it dies, and the latter to dig a hole and hide before I can get an analyst to admit he was totally a$$ backwards.

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