The Government is throwing liquidity into the system but the banks are clinging onto it, refusing to lend it out.
It's the ultimate breakdown of trust and flight to safety. Interest rates in the US have gone to zero. Some interest rates.
US Treasury sold $US30 billion in four-week bills last night at 0.00% and was swamped with demand four-times over. The Christmas effect probably had something to do with it, that is, stuff some money in the zero-return Chrissie stocking just in case things get worse. Rates can only go one way from here though.
They are running out of decimal places elsewhere - $US27 billion in three-month bills were auctioned at 0.005%, the lowest rate since this bill market began in 1929.
Meanwhile back at the farm
Anyone for a 100% loan to valuation ratio on their mortgage? Come and get it, it won't last!
Deutsche Bank's Ross Brown and his banking team issued an interesting note - which corroborates our angle yesterday the high-deposit-rate margin-squeeze-mirage given the banks' access to funding in the bill market - saying bank margins had been rising.
And spreads were expanding in most categories: retail and business lending, although there had been some offset in term lending.
"Our analysis suggests home loan spreads have expanded by ~50bps over the last six months (this includes higher BBSW funding costs but not higher term funding). Personal lending spreads have also expanded by 100bp, while business lending spreads for fixed terms have increased by 49-66bps over the last six months."
Among the findings of a "mystery shopping survey" conducted by Deutsche,
Home loans still freely available
100% LVR home loans still available!
Standard variable rate discounts of up to 70bps still available
Big dispersion of maximum loan size. Based on $70,000 income, maximum borrowing capacity ranged from a low of $340,000 (BOQ) to a high of $417,000 (SUN). The majors were clustered around $400,000.
Much larger borrowing capacity over phone than internet.
mwest@fairfax.com.au
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