Three Cheers, The Credit Markets Are Open Again!

Information here is from a Reuters article titled, "Dollar LIBOR Continues To Fall As Market Expects Rate Cut" dated January 15th.

Few are talking about it, but the Credit Markets are open again for business. LIBOR has come in substantially over the past month and the outstanding amount of Asset Backed Commercial Paper has stabilized.

LIBOR has fallen for 27 consecutive (business) days as the credit markets have considerably eased. The 3 month US Dollar LIBOR is now slightly below 4% and it was above 5% in mid December. This is very good news because LIBOR was well over 1% above the Fed Funds rate or the target set by the Federal Reserve and now it is in line or even slightly below the target Fed Funds rate. LIBOR is important as most credit card rates, adjustable rate mortgages and car loan interest rates are based off of it. A drop in LIBOR rates will flow directly into the consumer's pocket. The Asset Backed Commercial Paper is a bit more precarious. The amount of outstanding loans has steadied during the past 2 weeks. Not a trend but at least a potentially hopeful sign. On a day when the equity markets were doom and gloom I thought some good news may help cheer people up.