Across the Curve

Funding Crisis

There is a major funding crisis in progress . Overnight Libor is 6.44 percent and one week libor is 3.90 percent. That is an increase of 138 basis points from yesterday. Two week libor is 100 basis higher and one month libor is 25 basis points higher.There is an incredible tiering in effect,too. I just hopped off the phone with a CP trader who pointed out the levels at which pristine non financial names trade. Here are a couple of examples. BMW one month CP trades libor less 65 at 2.10percent.

John Deere trades libor less 55 at 2.20 percent in the one month sector.

One month Pfizer CP trades at libor less 65 at 2.10

The funding crisis has pushed yields on long bonds and prices on stocks lower. The yield on the 10 year note has pushed through the levels reached in March and it now yields 3.28 percent.

The most amazing result is the yield on the Long Bond which resides at 3.93 percent.

I said in my morning opening that it would take a cataclysm to force action from the FOMC today. This is a cataclysm . They will need to come up with something very novel to get out of this fix.