Credit Crisis Indicators

by: Bespoke Investment Group May 26, 2008 | about stocks: MUB    

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In late March, we highlighted charts of a few credit crisis indicators. Below we have updated those charts, and by the looks of them, things remain much better than they did a couple of months ago.

The first chart measures default risk by looking at a credit default swap index of investment grade debt. While the index has ticked slightly higher this week as equity markets have sold off, the rise has been puny compared to the spikes seen earlier this year.

The second chart looks at the national average of 30-year fixed mortgage rates. While it would be nice if rates were lower, they have remained stable and are not spiking like they were in January and February when banks demanded huge spreads to take on any risk whatsoever.

The last chart tracks the municipal bond market through the MUB ETF of S&P's National Municipal Bond Index. Another problem during the credit crisis was the failure of Auction Rate Securities, which tanked muni bonds and sent their yields sharply higher. As shown by the price chart, muni bonds have come back nicely as investors became attracted to those high yields.

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This article has 6 comments:

  •  
    May 26 08:21 AM
    Better than they were when counterparty risk would have brought down the entire financial structure around Bear, but still worse than when the credit crisis began in August?

    Dick Dick Bove write this? Time to buy financials!
    Reply | Link to Comment
  •  
    May 26 10:02 AM
    can you imagine what your losses would have been if you listened to Bove??
    Reply | Link to Comment
  •  
    May 26 10:34 AM
    With charts of consumer debt, margin debt and number of home mortgage resets adn these would give a wholistic view. Any chance we can see them together?
    Reply | Link to Comment
  •  
    May 26 11:41 AM
    Anyone have any other of ideas of how to monitor credit stress in the system?
    Reply | Link to Comment
  •  
    May 26 12:12 PM
    Better! Of course it gives that appearnce with the Fed socializing so much of the crap in exchange for treasuries for the banks and financial houses to leverage. Wonder how much of that leverage is going into oil futures?
    Reply | Link to Comment
  •  
    May 27 12:09 PM
    With the downgrades of financial s like GS, etc, as a background, I now see plenty of up trends in the above quoted charts...even though the author tries to minimize or appears to minimize on the surface, the risks involved.
    Reply | Link to Comment
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