SPREAD ‘EM: Is the Thermometer Rising on Credit Prices?

Credit prices have taken a sudden turn over the last two days, with spreads widening more than 20% since Tuesday.

While there is some modulation in the TED spread today, down 1.671% to 25.71 at 9:38 a.m. ET, the measure of the difference between three-month Treasurys and the three-month Libor rate, jumped to 26.15 yesterday. On Tuesday the TED closed at 21.66.

TED SPREAD

What’s going on here? There’s new evidence of the erosion on the mortgage market, and discontent in Congress over the job done by Ben Bernanke and Timothy Geithner can’t be helping the situation. You need only look at gold prices to see that the pessimism about the US economy is growing. Zero Hedge is reporting that a potential Ukrainian bond default is “spooking the market,” but I am not sure that’s it. There’s a risk premium coming back into the market, and bankers can’t be happy about that.