by Calculated Risk on 7/13/2009 03:20:00 PM

Investors seem bipolar, with the S&P 500 up about 2.5% today ...

Click on graph for larger image in new window.

This graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears".

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

The British Bankers' Association reported that the three-month dollar Libor rates were fixed at 0.509%. This is up slightly from Friday's record low of 0.505%. The LIBOR peaked at 4.81875% on Oct 10, 2008.

There has been improvement in the A2P2 spread. This has declined to 0.31. This is far below the record (for this cycle) of 5.86 after Thanksgiving, and still above the normal spread of around 20 bps.

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


Meanwhile the TED spread has decreased further and is now at 33.9. This is the difference between the interbank rate for three month loans and the three month Treasury. The peak was 463 on Oct 10th and a normal spread is around 50 bps.


This graph shows the spread between 30 year Moody's Aaa and Baa rated bonds and the 30 year treasury.

The spread has decreased sharply over the last few months. The spreads are still high, especially for lower rated paper.

The Moody's data is from the St. Louis Fed:

Moody's tries to include bonds with remaining maturities as close as possible to 30 years. Moody's drops bonds if the remaining life falls below 20 years, if the bond is susceptible to redemption, or if the rating changes.

Meanwhile from Bloomberg: ‘Fallen Angels’ Jump to Third-Highest Monthly Total, S&P Says

Fifteen companies lost their investment-grade ratings in June, the third-highest monthly tally since 1987, according to Standard & Poor’s.

With rankings for two additional issuers cut to junk status, the number of “fallen angels” climbed to 60 this year with a combined debt of $209.2 billion, S&P analysts led by Diane Vazza in New York said in a report today.
...
The largest fallen angel this year is CIT Group Inc. ...

Even though credit indicators have improved, there are plenty of companies in deep trouble.