Libor-OIS spread indicates credit crunch to continue

08/25/2008 | Bloomberg

The spread between the three-month London interbank offered rate for dollars and the overnight indexed swap rate is at 77 basis points, up from 24 basis points in January. By mid-December the spread is expected to widen to 85 basis points. Alan Greenspan, former chairman of the Federal Reserve, said the spread should indicate when the markets have returned to normal. According to forward markets, that won't be for quite some time. "It's like an ongoing nightmare and no one is sure when we're going to wake up," said Stuart Thomson, a money manager at Resolution Investment Management. "Things are going to get worse before they get better."

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