There are serious signs of stress in the US money markets. Commercial paper and LIBOR spreads have soared over the last couple of months to the highest levels since the 2008 financial crisis. The difference between LIBOR and OIS, a popular gauge of distress in the banking sector, has widened to 0.57% today from 0.10% just four months ago. The trillion dollar question is whether the stress is technical in nature, in which case short-term rates will eventually normalize, or is this spike in credit a harbinger of another banking catastrophe.
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