Update on the “Credit Crunch”

by Laura Ehrenberg-Chesler on December 3, 2009

in Banks,Bonds,Credit Crisis,Employment

We have posted often about the credit crisis, or “credit crunch” this year.  So an interesting question as we enter the last month of the year might be: “Is the credit crunch getting better?”

There are two parts of this answer, and they are somewhat conflicting.

Credit quality spreads have narrowed in the money and bond markets since the beginning of the year.  This tells us that the credit crisis has abated.  However, U.S. bank loans are still down for the year, and banks continue to be very risk averse in an environment where unemployment is over 10%.

A new employment number will be released this Friday.  Let’s see if this number creates a better or worse trajectory for the unemployment rate.  It will certainly impact the trend in lending.

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