Credit market pressure eases. Historic buying opportunity is about to end.

The 3-month Libor rate edged lower to 2.21% Tuesday from 2.22%. Its record high was 6.88%, when the credit crisis was at its worst.

The credit market showed signs of improvement Tuesday as lending rates eased and investors anticipate European central banks will lower key lending rates this week, making borrowing cheaper in Europe to spur lending. Treasuries rallied and yields remain near record lows keeping the cost of American debt at historic lows. Many wonder why the Treasury doesn’t lock in the low rates by offering long terms again. "The low rates on Treasury bills and the Treasury market in general is a sign of fear that is inherent in the marketplace - it is that flight to quality trade," said Kenneth Naehu, managing director and head of fixed income at Bel Air Investment Advisors.

The credit market is "healing," but banks are still hesitant to lend freely to each other, said William Larkin, portfolio manager at Cabot Money Management.

Libor, the London Interbank Offered Rate, is a daily average of what 16 different banks charge other banks to lend money in London and is used to calculate adjustable rate mortgages.
The stock market is poised to start lower today giving investors another chance to get back in the market. Investors who bailed out in recent weeks will be sorry they listened to “Mad Money” when the market begins its combined year end rally, election year rally, and the rally from fear to confidence that we are just in a recession similar to the period of bank failures from 1989 to 1991.

We still predict history will show that this week was the end of an historic buying period that lasted more than a month.