Credit Crisis Indicators

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.

click to enlarge

Comments

[SW Richmond:]

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!

2008 May 26 08:21 AM

[fatcat:]

can you imagine what your losses would have been if you listened to Bove??

2008 May 26 10:02 AM

[skwestorange:]

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?

2008 May 26 10:34 AM

[granger:]

Anyone have any other of ideas of how to monitor credit stress in the system?

2008 May 26 11:41 AM

[freddie:]

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?

2008 May 26 12:12 PM

[Gary Meade:]

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.

2008 May 27 12:09 PM