May 2001
Expected default rates soar in US
KMV designed its expected default rate charts as a way to make first banks, and now investors, better able to monitor credit risk and trade bonds. Now its data might be the harbinger of doom for the US, which has spent most of the year hoping that a series of interest rate cuts will be enough to salve its ills and stave off recession.
The Federal Reserve finally gave the US what it wanted. Another
rate cut, and one which came outside of the normal Federal Open
Market Committee meetings that take place roughly every seven
weeks. Stocks soared immediately the announcement was made at 11am
on Wednesday April 18, with the Dow closing up 399 points and
Nasdaq up 156. But within a week of April's surprise cut, all
Nasdaq's gains had evaporated and much of the Dow's had gone too.
Meanwhile it's still a matter of raging debate among economists
whether the US is indeed entering a recession. Signals are mixed.
Growth has never slowed as much as it has in the past 12 months
without the economy going into recession. Consumer confidence is at
a four-year low and heading downwards again after an upward blip in
March. Earnings warnings are still coming thick and fast.
Firms are laying people off...
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