Rate Watch 9/26/08: Carefully Floating

Liquidity is gone in the financial markets as Banks are not even lending to each other within the Federal Reserve System. All eyes are on the newly named "TARP", Troubled Asset Relief Program (the $700 Billion Bailout Program currently before Congress). You heard TARP from me first! Banks are failing, but immediate arrangements are made to keep depositors money safe and prevent a FDIC Insurance claim and payment. Washington Mutual's assets were purchased this morning by Chase, and Citi is in talks to take over Wachovia. Oil is down $2.14 to $104.83, the Dow is up 121 and bonds were flat and trading in a consolidating, sideways pattern for the past 3 days. Bonds and stocks are not making a move one way or the other until TARP is announced. The vote in Congress should be tomorrow (Saturday) and the announcement, as has been the pattern for the last 3 major financial announcements, on Sunday, September 28th. On the technical side, bonds continue to trade just above two levels of support of the 25 day and the 200 day moving average. For today, and for the past 3 days, I have recommended carefully floating while we wait on the sidelines to see what the decision is regarding the financial bailout package.