Economics at your fingertips  

What credit market indicators tell us

John Duca

Economic and Financial Policy Review, 1999, issue Q III, 2-13

Abstract: 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.

Keywords: Interest rates; Credit (search for similar items in EconPapers)
Date: 1999
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29) Track citations by RSS feed

Downloads: (external link) (application/pdf)
Our link check indicates that this URL is bad, the error code is: 503 Service Unavailable ( [301 Moved Permanently]-->

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

Access Statistics for this article

More articles in Economic and Financial Policy Review from Federal Reserve Bank of Dallas Contact information at EDIRC.
Bibliographic data for series maintained by Amy Chapman ().

Page updated 2019-08-25
Handle: RePEc:fip:fedder:y:1999:i:qiii:p:2-13