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Financial Markets Quake on Bear Stearns Crisis

Rates dropped this morning as stock markets negatively reacted concerns over the stability of the US banking system. Rates are only slightly lower today, but this is a result of strength in bonds from Friday.

A myriad of events, including the fire-sale purchase of Bear Stearns over the weekend by JP Morgan Chase, the lowering of the discount rate by the Fed, and a weaker than expected February Industrial production report contributed to the market movement.

Tomorrow we have the most important day of the week for rates, with the FOMC meeting. It is expected that the Fed will reduce the Fed Funds Rate by .5 to .75% tomorrow. In addition, we’ll get the PPI (Producer Price Index) for February which should give us another view of inflation, from the perspective of the producer. Last week’s CPI stunned markets showing no increase in prices, while the market had largely expected inflationary pressure.

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