Grim Chart of The Week – Houston We Have A Problem!

Wholly Kripies!

Here are two Federal Reserve charts that show how effectively (or ineffectively... ) the Fed is controlling certain key interest rates.

Notice that the top chart shows the spread between AA/non-financial, the rate that most closely tracks the Feds target, and the A2/P2 non-financial, the rate for paper of weaker quality.

As you can see, the spread has simply exploded and does not resemble any pattern seen in the last eight years.

Usually, (as you can see form the lower chart) the fed is able to keep the spread, or the difference between these rates, very small… typically 15-20 basis points for the difference between the rates of the highest and lowest quality paper BUT notice now we are seeing a truly whopping 280 basis point spread!