Low-risk lending

chart of the month

oct04-chart-gif

Twice this year banks have been in a position to lend money to non-financial corporate clients and then effectively hedge the risk in the credit default swap market either for free or even at a profit. The chart below, supplied by Morgan Stanley, shows that the difference between the cost of buying protection on the non-financial iTraxx European index and the average spread charged to single-A and triple-B corporates has recently become zero, and earlier in the year was negative.

This, says J

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