Thursday, October 2, 2008

Rate Watch 10/2/08: Floating into jobs report

Bonds opened in positive territory this morning as the Senate passed the Bailout Plan with a solid majority at 74-25. This version of the bill has some additional things attached to it that looks to make it more palitable to the House as it now goes back to them. The Bill now includes:

  • $150B in tax breaks for individuals and businesses
  • FDIC insurance increased to $250,000 from $100,000
  • and insurers required to treat mental health illness like general health problems (we all knew that there would be hitchhikers on the bill to get it to pass, right?)

Even as the bill passes the Senate and now goes back to the House, where with the atttachments to the bill, approval of the bill is more probable, the reality in the markets is that whether the bailout package passes the House or not (which will be voting tomorrow or as late as Friday), that the economy is still in a mess! (Remember, bad economic news is typically good for bonds, because there is a flight FROM stocks-with the ailing economy-TO bonds-where it is safer and more secure.)

There continues to be weakness in the labor market. The Initial Jobless Claims report was released at 497,000 claims, the most in 7 years. This negative report, coupled with the strong floor of support below Bonds at the 200 day moving average, and easing oil prices-now at 94.88 (down $3.00 from yesterday), and a weaker Stock market (off 263 at 9:24 a.m.), I am recommending floating into the jobs report tomorrow.

With all of the volatility in the markets lately, I will be watching very closely for changes in direction.

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