The Panic of 2007-2009 May Finally Be Ending

The decision of the huge French bank BNP Paribas on August 9, 2007 to suspend sales and redemptions of three of its mutual funds that had major investments in mortgage-backed securities that were based on U.S. subprime mortgages launched the Panic of 2007-2009. It was easy to tell we were in a panic because the spread between the 3-month LIBOR (London Interbank Offer Rate) U.S. dollar rate and the bond-equivalent yield on 3-month U.S. Treasury bills shot up from its long-term range of 5 to 9 basis points to over 200 basis points.

It was only a few months ago that these spreads began to come down out of the stratosphere. Click here to read the full post and comment (Insights subscribers) »