Incredible Pictures: The World In A State of Panic!

September 17-18 should be a milestone of sorts as world markets freezes in panic.

This From Bloomberg,

``U.S. Treasury three-month bill rates dropped to the lowest since at least 1954 on concern that credit market losses will widen after the bankruptcy of Lehman Brothers Holdings Inc. and the federal takeover of American International Group Inc.

``Investors pushed the rate as low as 0.233 percent as the loss of confidence in credit markets deepened. Reserve Primary Fund, the oldest U.S. money-market fund, became the first in 14 years to expose investors to losses after writing off $785 million of debt issued by Lehman.

3 month US Treasury Bill

Everyone (public and private entities) seem to be scampering for the exit doors to the point of buying short term treasuries that almost yield nothing.

Yet, one sided trades like this are vulnerable to sudden sharp reversals.

London-Interbank Offered Rate - British Bankers Association Fixing for US Dollar.

Bank Lending in terms of Libor. Again from Bloomberg, ``Money-market rates jumped this week as lending between banks seized up. The London interbank offered rate, or Libor, that banks charge each for three-month loans rose the most since 1999, to 3.06 percent, the British Bankers' Association said.”TED Spread

Seen from spread of Treasuries relative to bank lending rates, another quote from Bloomberg, ``The difference between what the U.S. government and banks pay to borrow in dollars for three months, the so-called TED spread, widened to the most since the October 1987 stock-market crash as bill yields tumbled. The spread widened as much as 64 basis points to 283 basis points. It was as low as 75 basis points on May 27.” Awesome.

This credit seizure episode has now spilled over to Asia!

Again from Bloomberg,

``Credit-default swap indexes in Australia and Asia outside Japan traded at all-time highs after the cost to protect against a default by Morgan Stanley and Goldman Sachs Group Inc. rose to records in New York yesterday. Default swaps rise as perceptions of credit quality deteriorate…

``The Markit iTraxx Australia Series 9 credit-default swap index traded 40 basis points higher at a record 235 basis points today and was at 225 basis points at 12:15 in Sydney, JPMorgan Chase & Co. prices show…

``The Asian benchmark that tracks 50 investment-grade borrowers outside Japan jumped as much as 30 basis points to a record 240, ICAP Plc prices show. The Markit iTraxx Japan index increased 31 basis points to 200 according to prices from Morgan Stanley…

MSCI Asia Pacific Index

So it does not put a doubt that credit woes have likewise tainted other assets as Asian equities seen above.

The MSCI Asia Pacific Index have fallen to a three year low!