Signs of recovery in credit markets

Barron’s sees recovery in credit markets where others, most notably RBS, are bearish. Who’s right? Let’s hope Barron’s. But, only time will tell.

Barron’s had this to say:

[Looking at] eight important credit-market indicators [the swap, credit default swap spread, Fannie Mae, Treasury Euro Dollar (TED), paper-bill, asset-backed, emerging-market, and junk-bond spreads] and their current position against their respective peaks in March, in every case, spreads are down quite sharply, meaning the rise in Treasury yields from the cycle lows on March 17 has been an important signal of declining systemic risk.

Some spreads have improved more than others, and most remain above historical averages, so we can’t say we’re out of the woods on the credit crisis just yet.

Barron’s, 19 Jun 2008

crisisderivativesmoney