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Daily Market Commentary

Bonds are much lower today as The FOMC has just increased the allowable range of securities acceptable at the discount window for repos.  Also, they are allowing 28 day term loans instead of the usual overnight facilities.  The loans may be securitized not only by treasury bonds and agency bonds, but now private mortgage-backed securities will be allowed.  The facility has been increased and now totals almost $350 billion in total liquidity that they have added to the market.


  The Fed certainly is digging into their arsenal of potential fixes here.  They must have heard the analogy of "pushing on a string" when lowering rates, and decided to go more directly to the source of this credit crisis.  We certainly will give them credit for thinking outside of the box, and would hope that this temporary solution is used as intended to help get credit where it is needed.  We'd also hope that this is indeed temporary and doesn't become part of regular business... we can already here traders calling it the "Bernanke Put", just as they did the Greenspan put.


  The ECB, Bank of Canada, Bk of England and the Swiss National Bank also announcing specific liquidity injection measures in tandem with the Fed.


  Short bonds (the 2 year treasury in particular) are getting absolutely creamed on this news, trading down almost half a point, or 25 basis points, on the session,



Political news is also stealing the headlines this morning, as even the "champion" or market ethics apparently has vices of his own.  Spitzer also happened to be a vocal backer of the AMBAC liquidity injection plan, leaving us to wonder just how instrumental he was to the plan.  We could see some fallout in the monoline insurers given this development.


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