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st, stocks suffered. But they then recovered, along with credit markets. The Itraxx index of European investment grade credit spreads, which had risen from 20 to 57 basis points in August, fell back to 29. With the help of central banks, overnight funds became cheap and easy to find. But the underlying problem for credit markets losses on U.S. mortgages has steadily worsened. Yesterday's news that Freddie Mac, the government supported mortgage group, is looking for additional equity capital, is only the latest blow. A section of the ABX index that tracks the value of BBB minus rated bonds backed by subprime mortgages is now only half the level where it was at the start of the credit crunch in August. Stock market investors hoped that the housing credit problems wouldn't cause much collateral damage. But interbank spreads are now close to near crisis levels, and...
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last updated 1 year ago #