Thursday, October 09, 2008

Question(s) of The Day - Are Rate Spreads Correct?

Is it possible that the LIBOR rate, TED and Commercial Paper spreads are simply telling us that, prior to this momentous unwind, rate spreads were just too low?

What makes the Fed think it can bully the market into taking on significant risk for just 15 – 30 basis points over its target rate?