Credit and Bond Markets Worsen Further

Mike Larson takes a closer look at the new developments in the credit and bond markets. Mr. Larson examines the new developments and takes a closer look at how each one is negative comparable to the past.

New developments in the credit and bond markets are happening fast and furiously. A study the Federal Reserve conducts every quarter called the "Senior Loan Officer Opinion Survey on Bank Lending Practices," monitors whether credit demand is rising or falling and whether lenders are tightening or loosening their lending standards. The Fed adds up the percentage of banks that either "tightened considerably" or "tightened somewhat" in a given loan category and nets that out against the percentage of banks that "eased somewhat" or "eased considerably." The results for the second quarter of 2008 were recently released and the y were not ideal:

- After suffering massive losses, Citibank and its rivals are aggressively tightening their lending standards. A net 55.4% of lenders tightened standards on commercial and industrial (C&I) loans to large- and mid-sized customers in the second quarter of 2008 compared to 32.2% in the prior quarter and -3.7% a year earlier.

- In commercial real estate, a net 78.6% of lenders tightened standards. That's the second-highest reading on record, behind the first quarter of 2008.

- The residential mortgage market is in even worse shape. 77.5% of lenders are tightening standards in subprime, the highest percentage ever.

- A net 62.3% of lenders surveyed were tightening standards on prime mortgages. That's up from 52.9% a quarter earlier and the highest the Fed has ever found.

- And the percentage of lenders tightening standards on credit card loans jumped to 32.4% from 9.7% in the first quarter of 2008. That's the highest since 1997. The tightening percentage for other consumer loans is now running at 44.4%, the highest since the Fed began collecting data on that category of loans in 1996.

"Meanwhile, the National Association of Realtors said the recent figures on pending home sales dropped another 1% in March. Moreover, February's reading was revised lower to minus 2.8% from the previously reported 1.9% decline. Regionally, pending sales fell in 3 out of 4 regions. The pending sales index is down 35% from its peak in April 2005," Larson states.

To read this issue online, please visit:

http://www.moneyandmarkets.com/Issues.aspxYour-Latest-Credit-Market-Road-Map-1770

About Mike Larson and Money and Markets

Mike Larson joined the company in 2001, and has more than 10 years of experience researching and writing about personal finance, investing, and the housing and mortgage industry. In 2003, Mr. Larson was named associate editor of the company's monthly Safe Money Report. In this role, he is responsible for writing and editing as well as analyzing trading opportunities for clients. Mr. Larson is also a regular contributor to the company's daily e-letter, Money and Markets.

Before joining Weiss Research, Mr. Larson was a personal finance reporter for Bankrate.com where he wrote extensively on mortgage lending, banking, residential real estate, and Federal Reserve Board policy. His responsibilities included analyzing economic data and interest rate trends for a weekly column and developing rate forecasts for a regular index feature. Previously, Mr. Larson held positions at Bloomberg News and the Boston Herald.

Recognized as an interest rate and mortgage market expert, Mr. Larson's views have been quoted in the Washington Post, Chicago Tribune, Dow Jones Newswires, Reuters, Sun-Sentinel and the Palm Beach Post. He has also appeared as an investment expert to discuss the housing market on CNBC, CNN, and Bloomberg Television. His writing has been acknowledged by both the National Association of Real Estate Editors and the Massachusetts Press Association.

Among the first analysts to call the housing slide, Mr. Larson's new policy paper, "How Federal Regulators, Lenders and Wall Street Created America's Housing Crisis: Nine Proposals for a Long-Term Recovery" has received broad media coverage following its July 2007 submission to the Federal Reserve and FDIC. Mr. Larson holds B.A. and B.S. degrees from Boston University.

Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit www.moneyandmarkets.com.

Credit and Bond Markets Worsen Further

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Credit and Bond Markets Worsen Further

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