Lisa, re:that the discount rate (fed fund) was unchanged not good for the bond pit
I'm glad you mention this. There seems to be some confusion regarding Discount rate and Fed funds rate.
My murky recollection is that discount rate is the interest charged to commercial banks when they borrow against the Fed. The Fed funds rate is the rate of overnight loans of reserves between banks. Typically, Fed funds rate (and 3month T-bills) lead the discount rate; the discount rate merely confirms monetary policy (open market operations) -- which we may observe as added liquidity, auctions, etc.
Of course, a change in discount rate only affects those banks that are in debt to the Fed, or consider borrowing from the Fed. And, the Fed funds rate typically reflects the ratio of surplus reserves to deficient reserves across banks.
So, what's it all mean? I dunno. Ask Keynes, Brunner or Ron Insana... But, I'd have been *amazed* if the FOMC had openly changed policy and touched the discount rate today. (Despite CNBC's 25/25 scenario, any discount rate cut would be associated with an aggressive fed funds rate cut.)
BWDIK,
Alan
ps. In the face of it all, YHOO is up 5pts. |
