Feb 8
US yields continued to fall Friday as Greek contagion concerns are a dominant theme. Two year yield is down to 75 bps, the crisis low in Dec ’08 was around 65 bps. In eurodollars, one year calendar spreads made new lows. The highest one-yr calendar is now EDZ10/EDZ11 which is only 135.5 bps, signaling a stagnant economy at best (in spite of a decline in the unemployment rate). Governments have replaced private credit demand with public spending, hoping to spark the former and light a fire that allows the public sector to recede…still being snuffed out by deleveraging.
–Consumer Credit again fell in December (11th straight month). Revolving credit -11.7% in Dec, from -18.6% in Nov. Non-revolving +5.2% from -6.1% due to strong car sales. But what is sort of interesting to compare are terms of loans, from earlier years in the decade to now, while the fed fund target is at an all time low. These rates are for years 2007, 2008, and 2009 respectively. 48 mo new car. 7.77, 7.02, 6.72 (nice decline of 1%). 24 month personal 12.38, 11.37, 11.1 (similar). Credit Card All Accts. 13.3, 12.08, 13.4. Sort of a stark reminder that credit is still tight for households and small businesses.
–Having lost about 9% from highs a couple of weeks ago to Friday’s low in the SPX, stocks had a spirited rally late Friday and edged into positive territory. Still worth noting that EUR/JPY has gone from 134 to 121.5 in a month…(risk aversion still reigns).
