The term structure of 3 month interbank is still an important metric of system stress or credit ease despite the massive switch to collateralized lending. By starting at a point farther on the curve, short term glitches can be reduced. The chart at left shows the sharp flattening that coincided with EZ system collapse. The long term Fed promise can only be judged in the context of more acceptable LIBOR sets in the near term. (i.e. Oct to now)

As is visible- 9 month forward year spread bottomed and turned wider as the liquidity stabalized the system despite (or helped by) the 2014 Fed date utterance. This is important feedback for policymakers. If the relationship spends any time over 25, listen for Fed talk to pick up. If its not cautionary, watch out.

(the spike at end Nov is the swap lines.the comeback was disbelief and continued EZ muddling)

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