Weekly Credit Strategy Update
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During the week money market distress reached new heights
Fri, Sep 26 2008, 13:07 GMT
by Danske Research Team
During the week money market distress reached new heights. As long as money markets are not working properly, credit markets will struggle. All eyes are currently on the forthcoming US bailout package. If successful, it is likely to help ease conditions in the money markets and distress at banks. If not, we are probably in for an even rougher ride in the weeks ahead. Washington Mutual has become the latest bank to fail in the US.
Deal or no deal – that is the question. By the end of today we will probably have much more clarification on the forthcoming US bailout package. Consequently, events that have taken place during the week are of minor importance as the immediate outlook for financial markets will depend on the final package (see more below). Still, many serious events took place during the week, highlighting the ongoing distress in financial markets.
Specifically, the situation in the money markets is dire, with the system largely dysfunctional meaning that liquidity is not being put to work in the financial system. We discuss developments in the money markets in more detail below.
CDS indices more or less remain the only liquid instruments in the credit market. Currently iTraxx Europe trades at 117bp while crossover trades at 596bp. The activity in the primary market has been non-existent and cash markets are not functioning at all.
Published on Fri, Sep 26 2008, 13:10 GMT
Archive
- The support package from the US Government to Citigroup kicked off the week in style
Published On Fri, Nov 28 2008, 13:12 GMT - The US auto makers are in severe distress
Published On Fri, Nov 21 2008, 13:00 GMT - Money markets seem to be on the right track
Published On Fri, Nov 14 2008, 11:33 GMT - Central banks in Europe have lowered interest rates
Published On Fri, Nov 7 2008, 13:23 GMT - Money market conditions improved after a US rate cut and dollar swap lines were expanded to emerging markets
Published On Fri, Oct 31 2008, 13:04 GMT
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