Lending rates mostly fell Monday as banks welcomed government aid, but financial institutions remained wary as the global economy continues to struggle.
U.S. Treasury prices were lower ahead of auctions and stocks appeared headed for an upbeat opening.
The 3-month Libor rate fell to 2.24% from 2.29% Friday, according to Bloomberg.com. The overnight Libor rate edged higher to 0.35% from 0.33%.
Libor, the London Interbank Offered Rate, is a daily average of what 16 different banks charge other banks to lend dollars in the U.K. and is a key barometer of liquidity in the credit market.
Both the 3-month and overnight rates have fallen significantly since hitting record highs during the height of the credit crisis.
The overnight Libor rate has been hovering near its all-time low of 0.32% after falling from a high of 6.87% on Sept. 30. The three-month Libor rate has come down 2.58 percentage points since its October high of 4.82%.
The declines came after the U.S. government launched a number of programs aimed at easing funding concerns for banks and encouraging lending between financial institutions have also helped lower Libor rates. Such initiatives include lowering interest rates, injecting capital into banks and providing insurance on all non-interest bearing accounts.
But ongoing economic challenges appear to be tempering the effects of improved lending conditions.
In a sign of the difficulties still facing the financial services industry, giant insurer American International Group got a $150 billion deal from the federal government Monday, as policymakers made significant changes to the terms of the company's original bailout.
While inter-bank lending conditions have improved, many economists say banks remain wary of lending to businesses and consumers as the outlook for global economic growth is cloudy.
Treasurys. Prices for ultra-safe U.S. government debt fell Monday as investors appeared upbeat about the restructured AIG plan and China's $586 billion economic stimulus package.
U.S. stock futures were higher about 1 hour before the opening bell. Asian markets rallied and major indexes in Europe were about 3% higher.
The benchmark 10-year note was down 14/32 to 101-7/32 and its yield rose to 3.85% from 3.78% on Friday. Bond prices and yields move in opposite directions.
The 2-year note slid 4/32 to 100-6/32 with a yield of 1.4%, up from 1.33%.
The 30-year bond fell 19/32 to 103-5/32 and yielded 4.31%, up from 4.24%.
Meanwhile, the Treasury Department is set to auction $25 billion in 3-year notes Monday. And on Wednesday, the government will auction $20 billion in 10-year notes.
segunda-feira, 10 de novembro de 2008
terça-feira, 4 de novembro de 2008
Oil blows past $70 as stocks rally
Oil prices rose above $70 a barrel Tuesday, propelled by a slipping dollar, a stronger equities market and OPEC production cuts, as Americans went to the polls.
U.S. crude for December delivery spiked $7.73 to $71.64 a barrel in electronic trading, as stocks turned higher and crude investors became less worried about market risk.
The equities market rebounded, sending the Dow up by as much as 300 points, as interbank lending loosened, allowing more cash to flow through the system.
"If we continue to see improvements in the credit markets, we could see oil stabilize or gain more ground," said Rachel Ziemba, energy analyst at economic research firm RGE Monitor.
Credit and rate cuts: The London interbank lending rate (Libor), a measurement of how much banks charge to lend money to each other, has been on the decline thanks to efforts by the world's governments and central banks.
The Federal Reserve cut its key lending rate last Wednesday to 1%, a low not seen since 2003. The Bank of Japan followed on Friday, cutting rates for the first time in 7 years.
The 3-month Libor rate had fallen to 2.71% from 2.86% on Monday. The lower the rate, the cheaper it is for banks to borrow cash, and the more dollars are available to the market.
Additionally, the Bank of England and the European Central Bank are expected to cut rates on Thursday, according to Ziemba.
Stocks: Stock markets rallied Tuesday on anticipation of rate cuts from Europe's central banks, and after several major companies reported better than expected earnings.
Credit card giant MasterCard (MA) reported stronger than expected earnings, not including a massive legal settlement with rival Discover Financial Services (DFS), which analysts discount when trying to determine the health of the company.
Meanwhile Illinois-based food producer Archer Daniels Midland Co. said its quarterly profit more than doubled as selling prices rose.
Markets have also been buoyed by the fact that, over the past several weeks, the financial markets have not seen any of the large bank blowups that have characterized the economic crisis since Bear Stearns crumbled in March.
"You're not getting that big heavy body blow to the market," said Tom Orr, head of research for investment brokerage Weeden & Co.
Potential collapses of global financial institutions such as UBS (UBS) and Barclays (BCS) have been averted by influxes of foreign cash, or by government action.
Stock market advances point out a "willingness by investors to take on more risk," said Ziemba.
However the bump may only be temporary, she added, since the global economy is still slow.
Over the past several months, worry about a stagnating global economy, and the corresponding decline in fuel demand, helped drive oil prices down from a record high of $147.27 a barrel in July.
Dollar: A slipping dollar also helped support crude prices.
The U.S. dollar fell compared to the 15-nation euro as investors sought the more lucrative returns of stocks and commodities. Investors often buy the dollar as a safe investment to avoid risk in other markets.
Oil, like most commodities, is traded in U.S. dollars. So when the value of the dollar falls, oil becomes more affordable to non-U.S. investors, and its dollar-denominated price goes up.
OPEC cuts: Also pushing oil higher were reports that members of the Organization of Petroleum Exporting Countries had begun implementing the cartel's planned production cuts.
Saudi Arabia cut exports by 900,000 barrels per day, according to media reports. Iran also said it was committed to cutting 199,000 barrels a day, according to reports.
While OPEC pledged in October to cut production by a total of 1.5 million barrels a day, there was real concern among investors about whether or not members would comply with the guideline, according to Ziemba.
The production cuts, along with strength in the equities markets have led many commodity investors to re-examine oil's supply and demand picture, according to Orr.
"People are starting to look a little more rationally about where commodity prices should be," said Orr.
However concerns remain that cuts may not be enough to give oil a bottom.
"Despite the production cuts, we're still in a global recession, and that's bad for oil demand," said Ziemba.
U.S. crude for December delivery spiked $7.73 to $71.64 a barrel in electronic trading, as stocks turned higher and crude investors became less worried about market risk.
The equities market rebounded, sending the Dow up by as much as 300 points, as interbank lending loosened, allowing more cash to flow through the system.
"If we continue to see improvements in the credit markets, we could see oil stabilize or gain more ground," said Rachel Ziemba, energy analyst at economic research firm RGE Monitor.
Credit and rate cuts: The London interbank lending rate (Libor), a measurement of how much banks charge to lend money to each other, has been on the decline thanks to efforts by the world's governments and central banks.
The Federal Reserve cut its key lending rate last Wednesday to 1%, a low not seen since 2003. The Bank of Japan followed on Friday, cutting rates for the first time in 7 years.
The 3-month Libor rate had fallen to 2.71% from 2.86% on Monday. The lower the rate, the cheaper it is for banks to borrow cash, and the more dollars are available to the market.
Additionally, the Bank of England and the European Central Bank are expected to cut rates on Thursday, according to Ziemba.
Stocks: Stock markets rallied Tuesday on anticipation of rate cuts from Europe's central banks, and after several major companies reported better than expected earnings.
Credit card giant MasterCard (MA) reported stronger than expected earnings, not including a massive legal settlement with rival Discover Financial Services (DFS), which analysts discount when trying to determine the health of the company.
Meanwhile Illinois-based food producer Archer Daniels Midland Co. said its quarterly profit more than doubled as selling prices rose.
Markets have also been buoyed by the fact that, over the past several weeks, the financial markets have not seen any of the large bank blowups that have characterized the economic crisis since Bear Stearns crumbled in March.
"You're not getting that big heavy body blow to the market," said Tom Orr, head of research for investment brokerage Weeden & Co.
Potential collapses of global financial institutions such as UBS (UBS) and Barclays (BCS) have been averted by influxes of foreign cash, or by government action.
Stock market advances point out a "willingness by investors to take on more risk," said Ziemba.
However the bump may only be temporary, she added, since the global economy is still slow.
Over the past several months, worry about a stagnating global economy, and the corresponding decline in fuel demand, helped drive oil prices down from a record high of $147.27 a barrel in July.
Dollar: A slipping dollar also helped support crude prices.
The U.S. dollar fell compared to the 15-nation euro as investors sought the more lucrative returns of stocks and commodities. Investors often buy the dollar as a safe investment to avoid risk in other markets.
Oil, like most commodities, is traded in U.S. dollars. So when the value of the dollar falls, oil becomes more affordable to non-U.S. investors, and its dollar-denominated price goes up.
OPEC cuts: Also pushing oil higher were reports that members of the Organization of Petroleum Exporting Countries had begun implementing the cartel's planned production cuts.
Saudi Arabia cut exports by 900,000 barrels per day, according to media reports. Iran also said it was committed to cutting 199,000 barrels a day, according to reports.
While OPEC pledged in October to cut production by a total of 1.5 million barrels a day, there was real concern among investors about whether or not members would comply with the guideline, according to Ziemba.
The production cuts, along with strength in the equities markets have led many commodity investors to re-examine oil's supply and demand picture, according to Orr.
"People are starting to look a little more rationally about where commodity prices should be," said Orr.
However concerns remain that cuts may not be enough to give oil a bottom.
"Despite the production cuts, we're still in a global recession, and that's bad for oil demand," said Ziemba.
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