Commentary for March 11, 2008

Good Morning

The Federal Reserve announced that it was expanding its lending program. “Under this new Term Securities Lending Facility (TSLF), the Federal Reserve will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days (rather than overnight, as in the existing program) by a pledge of other securities, including federal agency debt, federal agency residential-mortgage-backed securities (MBS) and non-agency AAA/Aaa-rated private-label residential MBS.”

More than the tax rebates or interest rate cuts, this move by the Fed cuts right to the core of the problem - loosening up the credit markets. This, in conjunction, with testing the January 22^nd low by the equity markets should at least provide a substantial bounce for the stock market. We’ll see if it lasts.

Regarding the fixed income markets, the moves by the Fed outlined above, not only sets the bond market back on its heels, but perhaps also portends more liquidity ahead and the top of the bond market (low in interest rates).

Dennis Fagan
Chris Fagan

This entry was posted on Tuesday, March 11th, 2008 at 8:00 am and is filed under Commentary. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.