Unchanged: The new positive
For the most part, bonds and credit market indicators have remained stagnant this year. Experts say that may be a good sign.
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NEW YORK (CNNMoney.com) -- The credit market hasn't shown many signs of changing recently, but that actually may be a good thing.
For three months after the height of the credit crunch in October, lending rates fell dramatically as the Federal Reserve unveiled countless unprecedented -- and expensive -- initiatives to ease credit, lower borrowing costs and boost lending that had essentially dried up. But for the past several months, lending rates have hardly moved an inch.
Similarly, Treasury yields fell substantially during the credit crisis to record lows, but have leveled off in 2009. Bond prices move in opposite direction to their yields.
Conditions in the credit market may not be improving, but a flat line is a welcome sign for bond investor after yields' precipitous declines from October through the end of 2008. For borrowers, steady rates may be an indication that the credit situation is stabilizing.
"The fact that Libor rates and bond yields came down and really haven't started to climb back up again, for this environment it's an okay sign," said Kim Rupert, fixed income analyst at Action Economics. "It suggest things may not be getting worse and there is some bottoming-out in the economic contraction."
Accordingly, the 3-month London Interbank Offered Rate (Libor, a key benchmark with more than $350 billion of assets tied to it, including many mortgage, auto and student loans) fell in a fairly straight line to 1.08% on Jan 14 from 4.82% on Oct. 10. Libor actually rose somewhat to a high of 1.33% on March 10, a day after the stock market sank to 12-year lows, but has leveled off since then, falling to 1.22% on Friday.
Treasury yields essentially followed the same path. The benchmark 10-year yield dropped to a record low of 2.08% on Dec. 18 from 4.08% on Oct. 14. The yield briefly crossed 3% on March 17, but a new Fed program to buy up $300 billion of government debt sent yields back down to 2.74% on Friday.
"To a large extent, we're being held stationary by the Fed program, central bank interest rates near zero levels and some remaining uncertainty about the bailout," Rupert said.
Many of the central banks across the globe have lowered their target interest rates to historic lows in an attempt to reduce borrowing costs. But with an inability to take rates lower, many are hoping that government intervention and a return to positive sentiment about the markets will further ease borrowing constraints.
"When we make some sort of improvement and see if these Fed programs add to a more sanguine feeling among bankers, Libor will come down a bit and it will be hard to keep bond yields this low," Rupert added.
That's not to say that there won't be bumps in the road. As earnings season looms, bad earnings could send Treasury yields lower and borrowing rates higher.
One-month Treasury bill yields fell below 0% on Thursday, as businesses hoped to boost their balance sheets at the end of the first quarter. But yields could head higher on worries about the enormous supply of U.S. debt that the government plans to auction off to support its economic rescue initiatives.
Still, the leveling off of bond and borrowing rates in the past few months could be a sign that things are set to change again -- for the better.
Bond prices: Bond prices were mixed on Friday as stocks ended the day lower.
The benchmark 10-year note was down 4/32 at 99 30/32 and its yield rose to 2.76% from 2.74% a day earlier. Prices and yields move in opposite directions.
The 30-year bond gained 19/32 to 97 31/32, and its yield slipped to 3.61% from 3.64% on Thursday.
The 2-year note held steady at 99 30/32, and yielded 0.92%.
The 3-month yield slipped a hundredth of a percentage point to 0.14% from Thursday.
Lending rates: The 3-month Libor rate was 1.22%, down from Thursday's level of 1.23%, according to data on Bloomberg.com. The overnight Libor rate also fell to 0.28% from 0.29%.
Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money in London.
Two credit market gauges were slightly mixed. The "TED" spread rose to 1.09 percentage points from 1.04 points. The wider the TED spread, the less willing investors are to take risks.
The Libor-OIS spread moved lower, to 0.98 percentage points from 1 point on Thursday. A narrower spread indicates that more cash is available for lending. 
