More instant Libor insight. This time via Michael Panzner at Financial Armageddon.
The TED spread (that’s the difference between 3 month T-bills and Libor) is up at levels not seen since the 1987 stock market crash. If this isn’t evidence of a liquidity drain then who knows what is. Note also the dip before the current high - the September/October “easing” when everyone thought they could breath again.
It’s also worth noting that whereas in 1987 banks could rely on a relatively robust bundle of retail deposits to ground things, now the contraction in lending is likely to be all the more pronounced, since interbank lending is far greater, relative to deposits. Succour indeed to Jan Hatzius at Goldman Sachs (subject of an imbroglio this weekend) - the chief economist there who wrote recently of the $2,000bn shrinkage to be felt as banks pulled back lending.
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