'All About the LIBOR'
LIBOR strife continues.
As you recall from reading here earlier, the heart of the current financial crisis is the freezing up of the credit markets.
Banks lend to one another -- or, rather, these days, they don't -- using the London Interbank Offered Rate (LIBOR). In recent weeks, the LIBOR has soared because banks don't trust each other.
Today, the LIBOR has been acting funny.
It dropped early in the day, making it look like the credit was starting to unfreeze, thanks to the "magic bullet" -- the Treasury's nationalization of U.S. banks announced before the markets opened today.
For the play-by-play for the rest of the day, we're going to turn it over to Art Cashin, UBS's colorful floor director at the New York Stock Exchange:
"In mid-morning, the LIBOR stopped going down and started going sideways, like the EKG on a Maine potato," Cashin said on CNBC moments ago. "People thought they had the magic bullet then they said, 'Holy smokes! It's not working, the LIBOR's still not going down!" And that's why we're seeing a choppy close."
The LIBOR has been rising toward the close.
Binky Chadha, Deutsche Bank's chief U.S. equities strategist, said the credit markets will be "pulled in two ways" in coming weeks.
On the one hand, the bank nationalization will help credit. On the other hand, the credit markets must now get back to dealing with an economy "that has been getting worse and is likely to get worse through the rest of the year," Chadha said.
-- Frank Ahrens
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