Credit Crisis Watch: A Look on Crisis Indicators

- by Amar Ranu *

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The fourth indicator worth keeping an eye on is the Barron's Confidence Index. This index is calculated by dividing the average indicative yield on high-grade bonds by the average yield on intermediate grade bonds. The discrepancy between the yields is indicative of investors' confidence. A declining ration indicates that investors are demanding a lower premium in yield for increased risk, showing waning confidence in the economy.

In summary, although some progress has been made as a result of central banks' liquidity injections and other monetary and fiscal measures, the credit markets are not yet liquifying.

Concluded.

* Amar Ranu has done his B.E. (Electronics) from B. D. College of Engineering, Wardha, followed by MBA (Finance & Marketing) from Indian School of Mines University (ISMU), Dhanbad. Then came brief stints at Indian Institute of Banking & Finance as an Officer and at LIC Mutual Fund Asset Management Co. Ltd. as Relationship Manager (Business Development / Analysis). He is currently a student of Indian Institute of Capital Markets, Navi Mumbai.
Article posted on February 8, 2009.

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