by Calculated Risk on 10/21/2008 02:00:00 PM

I'm tracking a few credit market indicators daily.

The U.S. economy is already in a recession, but without some improvement in the credit markets, the recession would be even worse. Fortunately there has been some improvement in the credit markets since the announcement early last week of Treasury equity investments in several major financial institutions. However there is still a long way to go ...

The yield on 3 month treasuries: 1.09% up from 0.93% (BETTER)


Click on graph for larger image in new window.

This graph shows the high, low, and the close for the three month treasury bill since the beginning of the year.

A good sign would be if the daily volatility subsides, and the yield moves up closer to the Fed funds rate, or about 1.25%.

The yield is increasing, but the daily volatility is still very high.

The TED spread: 2.74 down from 3.04 yesterday (BETTER)

The two year swap spread from Bloomberg: 102.25 down from 111.5 (BETTER)

Activity in the Treasury's Supplementary Financing Program (SFP). This is the Treasury program to raise cash for the Fed's liquidity initiatives. If this program slows down borrowing, I think that would be a good sign.

Here is a list of SFP sales. No new announcements today, but this will take some time. No Progress.

The A2P2 spread is 4.18 for Monday, down from 4.36 on Friday. BETTER.

This is the spread between high and low quality 30 day nonfinancial commercial paper.

During a recession, this spread usually increases because the risk of default for lower quality paper increases. However the recent values (over 400 bps) are far in excess of normal. If the credit crisis eases, I'd expect a significant decline in this spread.

Industry contacts. Still no positive news. I'm tracking some financing deals there are being held up right now. If these deals complete that would be a good sign. No improvement yet.