Remember that line from the Sheryl Crow song, “I like a good beer buzz early in the morning”?
LIBOR-OIS SPREAD
The TED measures the difference between three-month Treasurys and the three-month Libor rate; the Libor-OIS measures the difference between the three-month Libor rate and the anticipated average of the federal funds rate.
In fact, when you start contemplating these ice-rink-flat spreads, you start to see the invisible hand at work. No, not that invisible hand; the invisible hand of the federal government. It is the government that keeps Treasurys and the money rates in check, which means the spreads do not truly reflect the continuing credit instabilities in the general banking markets. Rather, they reflect the government’s want, and the government wants low rates. As I said, these spreads as good as a beer buzz early in the morning.
Um, I’m having a major flashback from my ECON303 class (in the early 90’s – cripes) that was all about M1, M2, M3, “M-whatever” that was called “money and banking.” Actually, it was so d*mned hard that we called it “money and boring.” The prof (very smart guy) ended up being on a consultant contract (or maybe a board, I ferget) for Citibank. Yeah… The Invisible Hand, Invisible Fist, whatever. 🙂 Like Steve McQueen, JJ…