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Interbank Credit Risk Is Rising Ominously Again In America

Tyler Durden's picture




 

We have been anxiously reminding investors of the drip-drip-drip increases in market-perceived credit risk for US financials for much of 2015. Having risen to almost 90bps amid the chaos of 2 weeks ago (almost double the lowest levels post-Lehman hit in June of last year), it appears systemic counterparty risk is very much on the rise. What is more concerning however, as Alhambra's Jeffrey Snider notes, the TED spread has exploded higher (since China's devaluation) indicating, as convention has it, a marked increase in perceptions of interbank credit risk.

"Credit" risk perceptions have risen rapidly...

 

And now the ominous TED Spread is flashing warning signals about the US Financial system...

 

As Alhambra's Jeffrey Snider notes:

With t-bills settled down again (another clue as to how disruptive the “dollar” run became at its worst), the TED spread has exploded higher indicating, as convention, a marked increase in at least perceptions of interbank credit risk.

 

The TED spread now is where it was in the weeks just following the flash crash (Greece/euro) in later May 2010, and equal to October 2011 after the SNB pegged to the euro and the Fed reproduced dollar swaps globally.

 

This is significant and seems to be underappreciated everywhere but places like VIX (and especially longer VIX futures).

*  *  *

Despite some modest amelioration in the last week - after massive seemingly coordinated intervention, perhaps, investors will start paying attention now.

 

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Fri, 09/11/2015 - 15:31 | 6537275 surf0766
surf0766's picture

Charts are meaningless

Fri, 09/11/2015 - 15:32 | 6537280 buzzsaw99
buzzsaw99's picture

meaningless

Fri, 09/11/2015 - 15:35 | 6537282 LawsofPhysics
LawsofPhysics's picture

LOL!!!  Okay, let these useless fucking paper-pushers fight to the death for the remaining real collateral.  Sounds great to me!!!!

Fri, 09/11/2015 - 15:38 | 6537307 RopeADope
RopeADope's picture

The TED spread is rather old school. Can it account for lying sociopath banker week where everything is hidden back in the attic and cheerleader news aggregator follow up week where the skittle shitting unicorn story is pushed out to everyone?

Fri, 09/11/2015 - 15:42 | 6537335 buzzsaw99
buzzsaw99's picture

from wiki: ...the TED spread is now calculated as the difference between the three-month LIBOR and the three-month T-bill interest rate.

Fri, 09/11/2015 - 15:40 | 6537318 Jtrillian
Jtrillian's picture

QE4+Infinity will set things right again.

Until people realize they are trading worthless paper backed by unsurmountable debt. 

But the FED has hinted that the market has farther to go before they release more QE.

We live in a world where currency wars are in play.  When they DO decide to reveal more QE, it will no doubt be a SURPRISE.

Fri, 09/11/2015 - 15:48 | 6537353 Temporalist
Temporalist's picture

You doomer ZHers and your "theories."  All this will take is some bank stress tests and all will be solved like the last 54 times.

Fri, 09/11/2015 - 16:10 | 6537443 Scooby Doo
Scooby Doo's picture

A little stress test, raised fees for consumers and borrowers, and maybe a bail in. That should fix it right up. Banks will be OK. But we the people be right screwed.....again.

Fri, 09/11/2015 - 15:41 | 6537325 the grateful un...
the grateful unemployed's picture

so the fed being those wise oracles of monetary policy will seek to price risk according to the market and raise interest rates (just like they did in 2008)

Fri, 09/11/2015 - 15:41 | 6537326 ShorTed
ShorTed's picture

"Interbank"...what a complete joke.  Those crooks don't lend to each other any longer, they all know better.  Now it's just the money mkt funds throwing cash at them.

Fri, 09/11/2015 - 15:53 | 6537374 Bill of Rights
Bill of Rights's picture

"Interbank" says: Send Gold!

Fri, 09/11/2015 - 16:17 | 6537478 starman
starman's picture

But the sheep can afford more Made in China shit so it's all good. 

 

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