We used these spreads to calculate implied default rates, which are lower than the historical norm. This suggests that risk is being underestimated – all the more so when one considers the frail state of the economy. Broadly speaking, we see signs that enterprises are increasingly sourcing debt capital from outside the banking sector.
2 Under this program, which is expected to begin operation next month, the Federal Reserve will lend for up to three years on a nonrecourse basis against asset-backed securities. By providing this financing, the program should increase the availability of credit to households and small businesses.