10/2T10:01 News and Notes

Libor rises a fourth day as banks hoard cash after bill passed - Bloomberg.com
Bloomberg.com reports the cost of borrowing in dollars in London for three months rose for a fourth day, signaling that banks haven't started to lend after the U.S. Senate approved a $700 bln plan to rescue beleaguered financial institutions. The London interbank offered rate, or Libor, that banks charge each other for such loans climbed 6 basis points to 4.21% today, the highest since Jan. 11, the British Bankers' Association said. The corresponding rate for euros advanced 3 basis points to a record 5.32%. The Libor-OIS spread, a gauge of cash scarcity among banks, widened to a record... Interbank rates have soared as governments in Europe and the U.S. rescued six financial institutions in the past week. The Libor-OIS spread, the difference between the three-month dollar rate and the overnight indexed swap rate, widened to a record 260 basis points today. It was at 197 basis points a week ago and 79 basis points a month ago. (Briefing.com note: The story references 3-month Libor; note that overnight Libor declined 111 bps to 2.68%)
RCM Comment: Remember, we monitor LIBOR and the TED spread to see if all the noise about bailouts and FED intervention is having a positive effect on the credit crisis. As this story illustrates, the proverbial 'canary in the coal mine' is still in desperate need of CPR.

ECONX Factory Orders See First Decline Since February
Factory Orders in August declined 4.0%, which is the first decline seen since February and the largest decline since October 2006. Unfilled orders, though, rose 0.4% to a record level. Excluding transportation, new factory orders were down 3.3%. July factory orders were revised to show a 0.7% increase from an originally reported 1.3% increase. Economists were anticipating an August decline on the order of 3.0%, so the weakness isn't necessarily surprising, particularly since the durable orders report last week was weaker than expected and there could be some expected offset against five consecutive monthly increases. Still, the factory orders report isn't helping today's market. It fits with a series of weaker-than-expected reports of late and is contributing to the market's worries about the slowing pace of economic activity.
RCM Comment: There is a true tug of war developing in the commodity space. Bad economic data suggests world wide recession, deflation and lower commodity prices VS massive liquidity injections (the FED has injected over $1.6 trillion in the last 5 days alone) leading to higher inflation and hence higher commodity prices. As always, our main focus is on the precious metals, as we believe that all plans of rescue whether successful or not involve paper currency value destruction.