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Paulson Plans to Bail Out Mortgage Lenders. Will this Help the U.S. dollar?

Wednesday, 05 December 2007 20:43:16 GMT

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Written by Antonio Sousa and David Rodri­guez

Henry Paulson, the United States Treasury Secretary, is expected to unveil a plan to address the crisis in the U.S. credit markets which was triggered by the collapse of the U.S. subprime market. Nearly $US362 billion worth of sub-prime loans are due to be reset in the U.S. in 2008 and Paulson's main concern is that millions of homeowners will be forced into delinquency. Looking at the U.S. money markets one can easily see that Paulson has many reasons for such anxiety. This week, the spread between junk-rated corporate bonds and U.S. Treasuries surged more 4 bps to trade close to 5.2 percent. Furthermore, the Dow Jones CDX North American Investment Grade index, the main North American Credit Default Swaps index, traded at 80 from 78 in the previous week.

Watch What the Fed Watches - Weekly Report
 
  • Henry Paulson, the United States Treasury Secretary, is expected to unveil a plan to address the crisis in the U.S. credit markets which was triggered by the collapse of the U.S. subprime market.
  • Nearly 362 billion U.S. dollars worth of sub-prime loans are due to be reset in the US in 2008 and Paulson's main concern is that millions of homeowners will be forced into delinquency.
  • A shockingly strong ADP Employment Change report and a surge in MBA Mortgage Applications leave a decidedly mixed outlook for the domestic consumer through the past week of trade.

 Click here to join DailyFX Analysts in discussing the Watch What the Fed Watches latest report.

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