460 billion subprime, not so bad. Sell more bonds.

Treasuries rose a second straight day as U.S. durable goods orders unexpectedly fell last month and home sales dropped, adding to concern that the economy is in a recession. Government debt rallied even as the Treasury prepares to sell $28 billion in two-year notes today, the most since 1972.


Purchases of new homes slowed to a 590,000 annual pace last month, the lowest level in 13 years, from 601,000 in January, according to the Commerce Department. Wall Street banks, brokerages and hedge funds may report $460 billion in credit losses from the collapse of the subprime- mortgage market, or almost four times the amount already disclosed.

Appetite may wane at the two-year note auction today amid a decrease in bets for Fed rate cuts. Traders see a 40 percent chance the Fed will cut its target rate a half percentage-point to 1.75 percent at its next meeting on April 30, compared with 82 percent a week ago, according to futures contracts on the Chicago Board of Trade. The rest of the bets are on a quarter- point reduction.

Lehmans next with $5 a gallon soon

Well Bear Stearns was saved, Lehmans lost 25% of their value in one day and gasoline could be $5.00 a gallon before labor day.

Seems like this could be a long hot summer.

Some are calling this a bottom. Looks to me like we have been thrown a rope, to hang on to be hanged on. We shall see

Gold hit $1,033, Oil $112 Dollar dives

The Fed announced two initiatives designed to bolster market liquidity and promote orderly market functioning, and approved the JP Morgan - Bear Stearns deal. First, they authorized the Federal Reserve Bank of New York to create a lending facility to improve the ability of primary dealers to provide financing to participants in securitization markets.

It is available today, and will be in place for at least six months and may be extended as conditions warrant. Credit extended to primary dealers under this facility may be collateralized by a broad range of investment-grade debt securities.

Second, the Federal Reserve Board decreased the primary credit rate ("Discount Rate") from 3.5% to 3.25%. Lastly, the Board also approved the financing arrangement announced by JPMorgan Chase and Bear Stearns where Bear is being purchased for 1% of its value only 16 days ago! Tomorrow, the FOMC will meet, and obviously the odds that the Fed will cut the Fed Funds rate by 1.0% have increased. Mortgage prices are really a mixed bag ("where should they be priced?") with the 10-yr down to 3.41% currently.