RISING CREDIT SPREADS ...
[Latest Global Dollar Liquidity Measure: +15.5% annual growth rate; latest Endogenous Liquidity Index: -3.0%]
Increasing funding liquidity and decreasing credit spreads: the ideal scenario to run with the bulls. But now credit spreads are rising: should we worry about risky assets? My (very simple) long-term models tell me not to worry — yet.
2 comments:
Your information continues to be interesting; would you mind sharing with your readers (or even just me) the details of the simple long term models you use please?
Ati. I just add the rate of growth of the Global Dollar Liquidity measure to the rate of change of the inverse of credit spreads. This "indicator" flashed a bullish sign in January 2003 -- and it has not changed ever since. I don't expect it to change any time soon. When it does change, it will be a messy affair, and it'll take some time before a new, solid sign (either bearish or bullish) finally surfaces.
The usual caveats apply: past performance ... Having said that, I'm in the process of reviewing the data, collecting more & more info, especially on CDS spreads. Cheers, Agustin.
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