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Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: MythMan who wrote (349929)	11/29/2007 9:00:27 PM
From: Real Man	Read Replies (1) \| Respond to of 436258

"Financial markets would also be closely watched for signs that they are affecting the broader economy, Bernanke said." I can see that -g-

To: MythMan who wrote (349929)	11/29/2007 9:09:08 PM
From: Giordano Bruno	Read Replies (1) \| Respond to of 436258

Let's hope the greed can overcome the fear. Crisis Mode for Money Markets? By EMILY BARRETT November 29, 2007 7:34 p.m. Money markets looked to be heading back into crisis mode Thursday, as a spike in short-term borrowing rates and heavy buying in government debt revisited the worst days of the summer credit crunch. Investors again sought the safest corners of the debt markets, buying heavily into three- and six-month T-bills, while a similar rush on longer-term notes pushed the benchmark 10-year Treasury below 4%. If this holds Friday, it will be the lowest weekly close for more than two years. The current distress took hold in the U.K. early Thursday as two banks moved to reassure investors about the health of their loan books. U.K. mortgage lender Bradford & Bingley said it expects full-year earnings to meet market expectations, but cautioned that impairment charges are expected to be higher in the second half of the year. And Alliance & Leicester conceded that its core operating profit would come in below analysts' expectations. What really shook market confidence was the surprisingly high setting of the one-month London interbank offered rate -- a benchmark for short-term lending between banks and a popular basis for debt market pricing. Bids for the morning fixing in the U.K. pulled Thursday's rate up to 5.22% from 4.82% the day before, as banks closed their wallets to lending that matures in the new year. "There's clearly more dysfunction in the money markets," said Carl Lantz, fixed income strategist at Credit Suisse in New York. He pointed out that Thursday's rate reflects the cost of lending that banks are prepared to book -- since any loan outstanding at year end must show on a bank's balance sheet. Anxiety for the health of the U.S. financial system, already running high after a series of large-scale writedowns by giants such as Citigroup and Merrill Lynch, intensified Thursday with a run on a state-administered fund. Florida's State Board of Administration called an emergency meeting Thursday to suspend withdrawals from the investment pool, which has been drained of nearly $10 billion, or around 40% of its assets, over the past two weeks. "There's some serious stress out there in the market and severe nervousness about lending, inspite of the fact that everyone's expecting the Fed to ease," said Alan Schapiro, rates strategist at UBS Financial Services. Nowhere was this more evident than in the shortest end of the Treasurys market -- widely credited as the safest haven in volatile times. Cash poured into T-bills, pushing the bond-equivalent yield on the three-month maturity to 2.90% at one point, even lower than its August trough. It's now trading around 2.97%. The six-month slid well below its summer lows, settling around 3.29% late Thursday. The wave of buying reached far along the Treasurys curve, too. The two-year yield sunk below 3% at one point, and ended the day around 3.06%. The 10-year gained 22/32 in price, shedding 10 basis points in yield to settle around 3.95%. Yields fall when prices rise. And the frenzy in Treasurys came in the face of strong competition from issuance elsewhere in the investment-grade sector of the debt market. There was no shortage of buyers for the roughly $10 billion of corporate bonds, which included $4 billion of 10-year General Electric notes. And the $6 billion offer of Freddie Mac preferred stock, attracted five times the necessary bids, paying a generous coupon of 8.375%. (can't you just smell FRE's desperation?) Write to Emily Barrett at emily.barrett@dowjones.com