Here’s a couple of interesting charts which are behaving in a boring fashion. The first is the 3 month LIBOR-OIS spread, and the second is the TED spread. Both are basically measures of funding stress/bank credit risk, and ever since the financial crisis have attracted as much attention as risk gauges as the VIX (equity volatility index). Even in an environment of quantitative tightening both are behaving in a fairly subdued manner. It goes to show how unperturbed US markets have been in the face of risk flareups in Europe and in particular emerging markets. Of course, as with the VIX, contrarians will note that the time to worry is not when these metrics are spiking, but when they are “too low” and indicate complacency. Certainly indicators to have on your radar.
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