Board of Governors of the Federal Reserve System

Figure 1: Asset Valuation Indicators

Price-to-earnings ratio in U.S. equity market

Monthly

 

Price-to-rent ratio in U.S. residential real estate market

Quarterly

 

Figure 2: Corporate Bond Market

Credit spreads

Series: 10-year high-yield and 10-year BBB

Horizon: 2002 to mid-2011

Description: Data are plotted as two curves. Data are daily. Units are basis points (for 10-year high-yield, right scale; for 10-year BBB, left scale).

The panel shows daily credit spreads of 10-year high-yield and 10-year BBB corporate bonds relative to off-the-run 10-year Treasury bonds.

For 10-year high-yield, the series begins at the start of 2002 just above 500 basis points. It steadily rises, peaking just below about 800 in late 2002 before falling for the next two years. From the end of 2004 through most of 2007, the series stabilizes in a range between approximately 300 and 400. At the end of 2007, the series skyrockets to a bit above 1,650 in late 2008. The series consistently and dramatically declines thereafter, except for a brief 200-point jump in mid-2010, and hovers at about 400 in mid-2011.

For 10-year BBB, the series follows a trajectory identical to that of the 10-year high-yield series, but with the former trading at a substantially lower spread. In general, the spread between the series is about 200 to 300. However, that spread widens noticeably in 2008 and 2009. The BBB series peaks in late 2008 at approximately 650. After 2008, the series precipitously declines and finishes in mid-2011 at approximately 180, having traded at about that value over the previous five months.

The curve for 10-year high-yield corporate bonds and the curve for 10-year BBB corporate bonds overlap in late 2008 and early 2009.

Note: Measured relative to an estimated off-the-run Treasury yield curve.

Source: Merrill Lynch and Federal Reserve staff estimates.

 

Far-term forward spreads

Series: High-yield and BBB

Horizon: 2000 to mid-2011

Description: Data are plotted as two curves. Data are daily. Units are percent (for high-yield, right scale; for BBB, left scale).

The panel shows far-term forward spreads for high-yield and BBB corporate bonds. The far-term forward spread is calculated by subtracting the yield of a 9-year bond from that of a 10-year bond for a given bond rating.

For high-yield, the series begins in 2000 at 3 percent before rapidly rising to above 6 in late 2000. The series then generally falls through early 2002 to below 3 before rising precipitously to almost reach 6 in late 2002. The series falls from 2003 until the end of 2004; after trending at around 2 in late 2004, it increases to above 3 in early 2005. It stagnates near 3 for the next two years before increasing dramatically in late 2007 through 2008, peaking at about 13 in late 2008. The series falls swiftly for the next two years, finishing in mid-2011 at about 1.5.

For BBB, the series follows a trajectory similar to that of the high-yield series over the time shown. The BBB series starts in 2000 at approximately 1.5 before rising to about 3 late in the year. It generally falls for about the next four years, bottoming out in early 2005 at approximately 1. The series gradually rises in 2005, 2006, and 2007 before accelerating to a peak of about 5 in late 2008. It steadily declines for the rest of the time shown, finishing in mid-2011 at a bit more than 1.

The curve for high-yield corporate bonds and the curve for BBB corporate bonds overlap in late 2001, early 2002, late 2003, early 2004, late 2008, mid-2010, and late 2010.

Note: Far-term forward spread between years 9 and 10.

Source: Merrill Lynch and Federal Reserve staff estimates.

 

Figure 3: Syndicated Leveraged Loan Market

By lender type

Series: Bank and institutional

Horizon: 1998 to 2011:Q1

Description: Data are plotted as bars. Units are billions of dollars, annual rate.

Bank issuance begins in 1998 with about $230 billion. It increases about 30 to reach approximately 265 in 1999, where it remains in 2000. Bank issuance suffers large declines to about 185 in 2001 and about 165 in 2002. However, the series rebounds strongly over the next several years. In 2003, it reaches a bit more than 200. For 2004 through 2008, bank issuance remains over 220. In 2009, it declines to about 180. In the first half of 2010, it drops to approximately 170, and in the second half of the year, it finishes slightly lower than that. Bank issuance continues to fall in the first quarter of 2011, ending at approximately 150.

Institutional (nonbank) issuance is far more volatile than bank issuance. In 1998, institutional issuance totals about 45. It remains below 100 until 2003, when it reaches approximately 120. It nearly doubles in 2004 to about 225 and increases sharply over the next three years to peak at approximately 425 in 2007. Institutional issuance tumbles in 2008 to about 70 and remains close to that amount in 2009. It recovers in the first half of 2010 to approximately 175, rises in the second half to about 225, and skyrockets in the first quarter of 2011 to about 415.

Source: Thomson Reuters LPC -- LoanConnector.

 

By use

Series: Refinancings and new money

Horizon: 1998 to 2011:Q1

Description: Data are plotted as bars. Units are billions of dollars, annual rate.

Issuance for refinancings begins in 1998 when it accounts for approximately $100 billion and for roughly similar amounts through 2002; it first cracks the 200 barrier in 2003. After reaching approximately 250 in 2004, the series generally declines over the next four years, hitting its nadir at about 100 in 2008. In 2009 and the first and second halves of 2010, refinancing issuance remains between about 150 and 200; it skyrockets in the first quarter of 2011 to just below 400.

New money issuance hovers between about 150 and 180 from 1998 through 2000. In 2001, it declines sharply to approximately 100, where it generally remains until 2004, when it about doubles in value. The series rises to about 250 in 2005 and to about 400 in 2006; it then briskly increases to a bit above 470 in 2007 before tumbling over the next two years to a low of approximately 80 in 2009. New money issuance recovers in 2010, reaching about 125 in the first half and slightly over 200 in the second half; it declines slightly below 200 in the first quarter of 2011.

Source: Thomson Reuters LPC -- LoanConnector.

 

Figure 4: Senior Loan Officer Opinion Survey on Bank Lending Practices

Net fraction of banks tightening standards on C&I loans

Quarterly

 

Net fraction of banks increasing spreads on C&I loans

Quarterly

 

Figure 5: Senior Credit Officer Opinion Survey on Dealer Financing Terms

Tightening of terms to private pools of capital

Percent; Quarterly

 

Changes in demand for securities financing

Percent; Quarterly

 

Figure 6: Triparty Repo Market

Volume

Monthly

 

Median haircuts applicable to specific collateral types

 

Figure 7: Syndicated Leveraged Loan Market

Inflows into bank loan funds

Monthly

 

Secondary-market prices

Series: Secondary-market prices

Horizon: Mid-2002 to mid-2011

Description: Data are plotted as a curve. Data are daily. Units are percent of par value.

The series begins at about 92 percent in mid-2002 before declining for the next several months, reaching approximately 88 late in the year. The series then rebounds and climbs gradually to about 97 in early 2004; it slightly increases over the next three years to nudge the 99 mark in mid-2007. The series declines sharply and reaches about 60 in late 2008 before staging a pronounced recovery and finishing a bit above 97 in mid-2011.

Note: Average bid price.

Source: LSTA/LPC Mark-to-Market Pricing.