In response to a stabilizing global market, bond prices have moved slightly higher early this morning. Amidst last weeks rush to liquidate credit markets, the ECB has now injected $278.9 billion, with $65 billion today. The Japanese were also active as they pumped $5 billion into Japan’s money markets. These bold and abrupt actions have eased liquidation fears as European stocks begin to move higher throughout the day. This is expected to spillover in the US markets as well, easing the downward stock pressure of last week. Also providing market confidence is Goldman Sachs. Early this morning they acknowledged a significant loss of value in their Global Equity Opportunities fund and are now placing an additional investment of $3 billion into the fund (with the aid of outsiders) as a show of confidence and step toward adding liquidity.
With the potentially market rebound, bond prices are expecting to decline slightly as money moves out of bonds and into stocks. A neutral to locking position is therefore strongly advised. But, when in doubt, lock.
The changing credit markets are putting some pressure on the Fed and stirring much debate on whether or not interest rates should be cut. There is an increase concern of inflation with this monetary injection into the markets; however, also an ongoing unease with the sub-prime mortgage problems throughout the economy. The debate falls as to whether or not a rate cut and ‘bailout’ for risky investors should take place. This leaves much to question and an anticipation for the Fed’s next move on September 18th.
By, Joe Brady