| Bonds Online |
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| 5/10/2013Market Performance |
| Municipal Bonds |
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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3.13% |
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S&P National 0-5 Year Municipal Bond Index
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0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
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1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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Not Yet Athens on the Potomac |
The New York Times - April 11, 2010 - by Bob Cox
Greece may be enviable as the ancient cradle of democracy — but no country wants to emulate its contemporary fiscal troubles. Markets are exacting a heavy price for Greece’s budget woes. Yet it is hardly the only country that would fall into crisis if creditors lost faith. Indeed, the United States government is running a deficit of Greek proportions, although its total debt load is much less frightening.
A spike last week in the yield on United States government debt — the benchmark 10-year Treasury yield hit 4 percent — ignited fears over the creditworthiness of the world’s largest economy. Those faded when investors piled into the next Treasury auction, pushing the 10-year yield back down to 3.88 percent by the end of the week.
Bond yields, and the cost of financing they imply, are an important gauge of the pressure in financial markets. Leaders of highly indebted countries need to watch them closely. But there are other signs. Herewith, a dashboard for America’s financial stewards:
CREDIT-DEFAULT SWAPS The idea that the United States would ever default on its debts used to seem absurd. But years of big deficits and the gargantuan government rescue of the financial system during the credit crisis have introduced some doubts, while the development of a lively market in sovereign-debt credit-default swaps has made it possible for investors to put money behind their views.
America’s credit-default swaps reached a record high along with the crisis in March 2009, when investors had to pay $100,000 to insure $10 million of Treasuries. The going rate has dropped to around $41,000. That pales in comparison to the amount — more than $400,000 — required for similar Greek protection. On this front, the United States still looks far from Greek.
CURRENCIES When investors lose confidence in a nation, its legal tender feels the sting. Before European leaders provided a long-awaited financial rescue line to Greece on Sunday, the euro had taken a pounding, thanks to the euro zone’s most troubled member. It’s down about 6 percent against the dollar and against the yen since the beginning of the year. The euro’s losses are clearly the dollar’s gain, but the buck has also climbed 4 percent against a broader basket of currencies. On this score, too, the market is signaling that Washington is a far cry from Athens.
STOCKS Equity markets are good rough indicators of how investors look at a country’s prospects — the productivity of its enterprises and the health of its financial system. Greece’s stock market, unsurprisingly, is on the ropes. It’s down 9 percent so far this year while the DAX of more creditworthy Germany is up 5 percent. The S.& P. 500 has gained 7 percent since the beginning of the year. That’s a sign that investors in United States stocks aren’t worried.
OPTIONS VOLATILITY Options on stock market volatility can be an even more sensitive indicator of fear than the market itself. The Chicago Board Options Exchange Volatility Index, which is a measure of expected swings in the S.& P. 500, is sometimes called the “fear index.” Right now it is exhibiting more calm than fright. On Friday it stood at around 16, below its level in August 2008. Of course, that low was followed by a huge economic and financial storm.
Bond yields, credit-default swap spreads, currency strength, stock markets and options volatility: none of these market measures in isolation provides a significant read on the state of sovereign finances — of the United States or any other country. Taken as a whole, though, they provide a good indication of the perceptions of the widest possible swath of investors in credit, equity, derivatives and currency markets.
These altimeters of American financial health are not flashing red, orange or even yellow. But they are more current than leading indicators. It might not take much for sentiment to shift. Any sign that the government is not taking seriously its need to reduce the deficit, perhaps by embarking on another stimulus plan, could tip any of these.
As Lawrence H. Summers, who heads the White House’s National Economic Council, said in a speech last week, the ability of great nations “to mobilize to solve problems before they are absolutely imminent crises is what determines their longevity.” This market dashboard is a useful way to mark that progress.
For more independent financial commentary and analysis, visit www.breakingviews.com.
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