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The cost of three-month loans between banks fell to fresh multi-year lows Tuesday amid signs that the credit markets are easing.
The rate on three-month loans in dollars — known as the London Interbank Offered Rate, or Libor — fell around 0.07 percentage points to 1.09 percent, its lowest level since June 2003, according to the British Bankers' Association.
Interbank rates are important because they affect the cost of loans in the wider economy, for both businesses and individuals. Rates have been high during the financial crisis as banks have hoarded cash and worried that other lenders might collapse and not pay them back.
Considering the credit markets are improving – why aren't the world stock markets improving too?
“The phenomenon that dragged down the credit market was so much more powerful than the equities market,” explains Karen Finerman. “The pendulum had swung way too far in the debt market.”
Joe Terranova adds that the Libor rate simply doesn't matter right now. “Does the cost of borrowing money matter when you're already choking on debt?"
Guy Adami sees the situation differently. He says, frankly I think the credit market is setting up for a nice equity move to the upside.” He thinks if oil rips higher on Wednesday after Tuesday's reversal it will take the S&P with it.
What’s the trade?
“If you want to dabble in the equities market look for companies with healthy balance sheets,” counsels Joe Terranova. “Or think about playing the corporate bond market with the iShares iBoxx $ Invest Grade Corp Bond [LQD
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Trader disclosure: On Jan 13, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Najarian Owns (CSCO) Stock; Najarian Owns (CSCO) Short Calls; Najarian Owns (MSFT) Stock; Najarian Owns (MSFT) Short Calls; Najarian Owns (DNA) Calls; Najarian Owns (XME) Calls; Najarian Owns (NVLS) Calls; Najarian Own (NVDA) Calls; Najarian Owns (MS); Najarian Owns (MS) Short Calls; Najarian Owns (MS) Put Spread; Adami Owns (AGU), (C), (BTU), (GS), (INTC), (MSFT), (NUE); Seymour Owns (BAC), (EEM), (F), (INFY), (EDC); Seymour's Firm is Short (PBR); Finerman's Firm Owns (AEO), (MSFT), (DNA); Finerman's Firm Owns (MSFT) Put Spreads; Finerman's Firm Owns (DNA) call spreads; Finerman's Firm Is Short (IYR), (IJR), (IWM), (MDY), (SPY), (USO), (ANF), (DSX)
Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd: Virtus Investment Partners Owns More Than 1% Of (DBC): Virtus Investment Partners Owns More Than 1% Of Seagate Tax Refund Rights
Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO; Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV)
CNBC.com with wires
Data is a real-time snapshot *Data is delayed at least 15 minutes