I admit it... I've posted WAY too much about swap spreads, but in my last post on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 subject of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 30 year swap spreads (defined here), I received this comment:

Not sure why this is considered good or bad. Seems indifferent to me as banks are basically an extension of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Fed balance sheet and federal government for all intents and purposes now. This doesn't have any impact on credit to cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 real economy. Just filling in holes of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 banks balance sheets.

How's this for importance? For cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 past 8 years (I could only find data going back 8 years) 30 year swap spreads have followed equities with alarming regularity (I smoocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365d cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 changes by averaging cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 change over cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 past month):


HOWEVER, over cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 last month, 30 year swap spreads have rallied significantly more than cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 equity market.



Will swap spreads lead cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 market higher or should we view this recent rally in credit markets as short-lived? Or should we ignore it altogecá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r. Interesting post at Infectious Greed about just that. According to Paul:

The risks of financial history are higher than ever though. We have more data, better analytical tools, and more people crunching cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 data, so we can expect to see data on pretty much anything we want to see. There will always be someone tearing apart something to find something interesting, so something interesting will be found. My friend James Altucher has always been great on this subject, ripping holes in pretty much every data-driven rule of thumb by which people claim to trade and/or find market tops and bottoms. They mostly don’t work.

Agreed.

Swap spreads continue to "normalize". Don't understand and want to? Go here and/or here:

We've detailed cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 odd occurrence a few times at EconomPic of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 30 Year Swap trading through Treasuries (implies that banks can borrow at a lower rate than cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 U.S. government). This has whipped back over cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 past few weeks and today has traded a 0 bps to Treasuries.



I won't declare victory in credit markets just yet, but it is a good sign.

This is an update of a previous post (for full details of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 technical factors go to that link).

Across cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Curve details:

Swap spreads moved wildly. The 2 year spread narrowed 6 basis points to 82. Three year spreads tightened 7 ¼ basis points to 76 ¾ basis points. Five year spreads narrowed 1 ¼ basis points to 70 basis points. Ten year spreads moved wider 17 basis points to 17 ½ basis points. Thirty year spreads widened 20 basis points to NEGATIVE 22.

While a ~50 bp rebound in this measure over a few days is BIG, at some point in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 near future I expect a much more violent rebound towards zero as cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 realization that paying a floating rate and receiving 2.5% over 30 years has a ton of risk and cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 flight to short-term Treasuries unwinds.

A post on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 FT from back in 2006:

Swap spreads are currently trading through Treasuries on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 long end of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 yield curve. Not just a few bps, but 30+ bps.

What does this imply? It "implies" that investors are willing to lend to a counter-party (bank, hedge fund, etc...) at a lower rate than cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 U.S. government. While this isn't cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 reason for cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 inversion (I detailed back in October some technical factors that caused this), it still shows how distressed this current environment is.

How strange is this? Well back in October when cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 spread first inverted, we get this from cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 FT:

“Negative swap spreads have been considered by many to be a macá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365matical impossibility, just like negative probabilities or negative interest rates,” said Fidelio Tata, head of interest rate derivatives strategy at RBS Greenwich Capital Markets.

In this environment, nothing is impossible.

Per Bloomberg: