Rate Watch 10/7/08: Cautiously Floating to Lock Bias

Stocks are trying to stabilize today after the largest point swing in history yesterday. This morning, Bond prices have already been all over the place, but as long as prices remain above the 25 day moving average at close today, I recommend floating. In good news for stability and confidence in the stock market, the Fed and Treasury Department will begin to purchase short term commercial paper from businesses to meet their short term capital needs. I will continue to monitor the situation and a lock bias will be prudent if Bond Prices close lower than the 25 day moving average. Rumors are surfacing this morning that the Fed will make an emergency cut in the Fed funds rate, but remember, Bonds have not liked this Fed action in the past 4 rate cuts because it is viewed as inflationary. If there is an emergency cut, be ready for increased volatility in Stocks and Bonds.