Keep A Weather Eye Out This Week

Keep your eyes open, this might be an interesting week. There was some deterioration in the credit markets after Paulson dissed the idea of buying bad assets and the battle over Detroit will heat up. There’s also a fair amount of economic data coming out.

Here are some comments on the credit markets via Across the Curve.

What follows is the thoughts of a trader on the rise in Libor the last two days:

Libor set higher for the first time in 24 days. The market took this as anaffront to spreads and proceeded to buy Libor/OIS pretty heavily.

Why? well,yet again this marks a potential turning point in the credit cycle as libor hastended to trend in a meaningful manner and more specifically, over the past fewweeks one bank has done a tremendous job in getting libor lower.

Does thismark the end? If this is the case, then we could be in for a wild ride overthe next few weeks.

Two days do not make a trend, but I would treat any
surprise moves higher in libor as a warning and would not fight what couldpotentially be another substantial widening.

Volatility will surely be higher

I aplologize for the formatting but that’s how it was posted. Forget the esthetics and concentrate on the message. It comes from a pretty credible guy.

Tom Lindmark

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