What credit market indicators tell us
John Duca shows that interest rate spreads and loan surveys should be interpreted carefully when assessing the availability of credit and its impact on the economy. This is especially true of interest rate spread indicators, some of which reflect prepayment, liquidity, or default risk premiums that have different economic implications. It can be helpful to decompose spreads before drawing economic inferences from the structure of interest rates. Spreads between yields on non-top-grade private-sector bonds and Treasury bonds, in particular, have a large prepayment premium in addition to a time-varying default risk premium. It is also important to recognize that even some decomposed spreads include more than one type of risk premium. In this regard, a widening of some yield spreads that contain a small default risk component, such as the Aaa-Treasury spread, could reflect a rise in prepayment or liquidity risk premiums, whose magnitudes may be hard to identify separately.
Volume (Year): (1999)
Issue (Month): Q III ()
|Contact details of provider:|| Web page: http://www.dallasfed.org/|
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John V. Duca, 1995. "Credit availability, bank consumer lending, and consumer durables," Working Papers 9514, Federal Reserve Bank of Dallas.
When requesting a correction, please mention this item's handle: RePEc:fip:fedder:y:1999:i:qiii:p:2-13. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Delia Rodriguez)The email address of this maintainer does not seem to be valid anymore. Please ask Delia Rodriguez to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.