By: PRBuzz
November 19, 2012 at 11:16 AM EST
Short-Term Loan Costs Reach Near-Record Low reports Payday Ninja

San Francisco, CA (PRBuzz.com) November 19, 2012 -- Private United States borrowing costs are at near-record lows, thanks to an infusion of cash from the Federal Reserve.

Investors' hopefulness that Europe will get a handle on its debt crisis further reduced rates, allowing banks and other private companies to take out short-term loans at rates not seen since the 1990s.

The third major factor in low cost borrowing on short-term loans was three consecutive days of gains for Wall Street stocks.

"People seem more confident in general," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.

According to Reuters, the interest rate spread on two-year dollar swap contracts over the yield on two-year Treasury notes most recently traded at 0.0875 of a percentage point.

If the two-year swap spread were to close at 0.080 of a percentage point, it would beat the record set in 1993, according to analysts.

At the beginning of the year, the two-year swap spread was about 0.48 percentage point.
This shrinkage in the premium between public and private borrowing means corporations and other businesses can borrow nearly as inexpensively as the government.

"There is a tremendous amount of liquidity in the system," Goldberg said. "Central banks are leaving their spigots open so that's helping to drive down borrowing costs."

The Federal Reserve, last month, purchased more bonds on a large scale - the third time it has done so - focusing on mortgage-backed securities to support the housing sector. That sector has shown signs of recovery.

Meanwhile, the U.S. central bank extended its promise to leave short-term rates near zero through mid-2015.

Additional borrowing from U.S. corporations has not translated into quicker job growth, however. Thus orders on durable goods, often seen as a measurement of business investments, fell 13.2% in August. That was the largest monthly drop since January 2009.

"It's a positive factor, but it's not the primary factor in driving the economy," said Conrad DeQuadros, senior economist at RDQ Economics in New York. "We have had these low rates for a very long time."

DeQuadros said investors continue to worry about how Congress will handle the so-called fiscal cliff. If unresolved, he noted, it will slow down the economy through next year.

Low borrowing costs have given companies more time to endure what continues to be a drawn-out economic downturn, say analysts.

About Payday Ninja:

Payday Ninja (http://www.paydayninja.org/) offers payday loans, or short-term loans, to applicants in exchange for repayment on their next payday. Even applicants with bad credit tend to be approved. PayDayNinja.org arranges for loans to be deposited into borrowers' bank accounts as soon as 15 minutes after approval.

Orlando Reed Larson
Paydayninja.org
Phone: 4157688912
Email: contact@paydayninja.org

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