A Forex View From Afar

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No Help Yet on Rates

Written by A Forex View From Afar on Tuesday, February 26, 2008

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One of the reasons the Fed reduced rates in September 2007 was the lack of liquidity from financial market, mostly credit markets. After a quick road-trip to 3% in Funds Rate, liquidity still hasn’t reach the credit market. The Auction Bond market, used by hospitals, schools and Government Institutions to access long term funds with adjustable interest rate on short term, is almost at a freeze point. With every failed Bond auction that we see, the interest rate is adjusted higher, this is called the penalty rate.

On his famous paper on The Great Depression, Mr. Bernanke said a recession is when liquidity can’t meet current liabilities. Auction Bonds shows that liquidity is hard to find, and expensive once it is found. Please Mr B, take a look at what you wrote previously.

The Housing numbers today are clearly showing that the lower rates are not impacting inventories, they will take 6-9 months, if at all at these levels because Institutions are just absorbing previous losses with the cheaper money, it would seem. Can you afford to wait, and why were these cuts not delivered in small 0.25% offerings over a longer period of time from July of last year when the LDO and CDO debt was first downgraded? We need the answers if we are to avert another Bust Cycle in 4 years time.

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Fundies and Trading
There is a constant question from some traders as to why anybody would ever need to consider the ‘F’ word when trading. Fundamentals: what is so damaging at looking at both Technical charts and having a Fundamental filter to gauge how many Lots to put on? Why is it that accepting that Technicals give us price points to trade, but Fundamentals determine the direction that we travel is so difficult for some traders to accept? Without a Fundamental Filter very few pure Technical traders would have seen this Dollar move coming today.

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