Money Market: Waiting for Godot

October 16th, 2008 7:27 am | by John Jansen |

My money market correspondent cites some positive signs in the market but notes that he has not observed “any consequential investor commitment” to any sector of the market beyond the overnight market.

He applauds the various governmental initiatives here and abroad. The Irish government put the finishing touches on their guarantee plan and the Swiss have provided aid for their troubled banks.

However, investors have not responded to the actions and remain largely on the sidelines. Many investors now proclaim that they are waiting for October 27 and the opening of the Federal Reserve CP facility. They want to see how that promotes market liquidity.

So,yes, the mood is improved and Libor settings are gliding lower but investors are still not confident enough to commit capital at the present time.

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  1. 6 Responses to “Money Market: Waiting for Godot”

  2. By Ed on Oct 16, 2008 | Reply

    I can speak a little more to the situation here in Britain, but it seems to me that an important reason for the continuing paralysis is uncertainty over dividend payments.

    For pension funds here anyway, they are extremely reliant on the generous dividends historically paid by UK banks, and now there’s a stand-off with Gordon Brown over the terms of the recapitalisations.

    I don’t know if the same sort of issue is on the table elsewhere, but certainly in the UK it is a factor in the non-recovery of bank stocks so far.

  3. By Terminal on Oct 16, 2008 | Reply

    The South Korean currency fell 9.7% overnight. An encore of the ’97 Asian crisis is now a real possibility to be added to the mix.

  4. By Alex on Oct 16, 2008 | Reply

    BOE to begin offering double discounts

  5. By M on Oct 16, 2008 | Reply

    Here is another, non-government, initiative:
    http://www.guardian.co.uk/business/feedarticle/7877074

    maybe that will help a bit as well.

  6. By tiger on Oct 16, 2008 | Reply

    So does he mean it’s a good opportunity to get in, or can this lack of investor participation feedback into further bad news? I’ve been wondering when it’ll be safe to get back into corporates. Overall looks like there’s more downside but maybe junk is closer to being well priced…

  7. By John Jansen on Oct 16, 2008 | Reply

    tiger,

    the trader with whom i regularly speak is optimistic because of the actions of the Treasury and the Fed.

    He is somewhat pessimistic because he does not yet see private (non governmental) money flowing into his market in any meaningful way.

    The announcement was Tuesday. He gave a pass as participants waded through details of the announcements. But he is disappointed that the action remains in overnights with litle investor interest out on the money market curve.

    The corporate bond market seems truly broken. You can probably leave the first 50 basis points on the table when you jump in there.

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