hey! a thaw in credit

3 major areas of the credit markets are thawing today, hopefully it continues. t- yields are markedly higher, the 10-year swap rate is plunging, and fnm sold bills today at rates well below recent levels. swaps on fre and fnm also settled on monday.

all of these signals suggest a movement toward risk-taking. if swap rates follow suit, and futures contracts are beginning to show signs investors are betting on a decline in libor - the cuts were announced today AFTER libor was set today (why?) - a substantial rally in riskier assets, such as equities and corporate bonds, will likely follow.

this is short term stuff however. the swap and libor indicators must hold for any lasting improvement in the credit markets, as concerns about near-term risks - heck, near-term complete panic - are subsiding. confidence will feed on itself i suspect, just like fear does.

crucial is today's sharp rise in treasury yields, as investors leave safety and take some risk for a change. rates on 10-years are up a whopping 27 basis points, for example, and 10s have registered a nearly 3-point decline.

the 10-year swap rate has moved remarkably, partly because treasury yields are up. the spread between 10-year swap rates, which reflect the interest rate that debt obligors pay to swap out of a floating-rate obligation into a fixed-rate one (they do this when they are worried about credit spreads), is down a whopping 16 basis points to 45.5 basis points, the lowest level since 1/06, which is, of course, before the credit crisis bloomed last summer.