ANNUAL REPORT 2010

Excess Liquidity and Interbank Market
39,000
36,000
33,000
30,000
27,000
24,000
21,000
18,000
15,000
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Excess on Reserve Requirements
Interbank rate
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Mercantil Servicios Financieros
55
Dec-10
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
The Federal Reserve Bank (FRB) maintained its interest rate unchanged at 0.25% and
announced new plans to buy U.S. securities in order to contain possible increases in longterm
interest rates. The credit risk perception continues to improve during 2010. The five-year
swap spread (the indicator used to measure credit conditions in general) fell 16 basis points
at year end, which was considerably lower than the 120 basis points maximum in September
2008. The activity related to corporate debt issues increased during 2010, new investment
grade and high-yield bonds totaled US$ 962 and US$ 352 billion respectively. This figure
reflects the reactivation of the debt market, particularly in high-yielding bonds. Mergers and
acquisitions were also reactivated in 2010 and exceeded the value of transactions in 2009 by
almost one trillion dollars.
In the real estate market, house prices tended to stabilize in the first half of 2010, when the
government offered fiscal credits to home buyers. The average rate on 30-year fixed-rate
mortgages reached its minimum level in 2010, almost 4%. The process can be explained by
foreclosures by the Federal Reserve. The mortgage foreclosure process was one of the more
significant topics in 2010. Most of the largest banks halted their mortgage foreclosures due
to the failure of the approval process.