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A Finextra member
A Finextra member 19 August, 2008, 07:49Be the first to give this comment the thumbs up 0 likes

Just one correction, yield is 425 basis points more than U.S. Treasuries of similar maturity. Its not 425 basis point in absolute terms.

As we have seen that most of the financial companies are raising funds to maintain liquidity, yields are expected to rise because challenge for most of the companies is to avoid liquidity crunch situation in near future when global economic condition is deteriorating with rising interest rate and inflation.

You have rightly pointed out that this is bad situation for the consumers as there would not be lower APR and Fees, this is bad situation for companies too because this may result into more bad debts and write-offs. Hence, companies will face more business risk (in terms of bad debts) along with more finnancial risk (higher interest cost).