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Thursday, September 27, 2007

Credit Markets Ease as Fed May Cut Rates More

September 27 2007
Credit market conditions eased Wednesday, not from any big improvement in underlying conditions but because the U.S. Federal Reserve is expected to throw moral hazard concerns to the wind and cut rates again in October. The world's top central bankers, including Fed Chairman Ben Bernanke, have repeatedly warned that they will not bail out feckless investors by cutting official rates to prop up markets but financial markets are pinning their hopes on just that. Demand for safe haven assets such as U.S. Treasury bonds was lower, equities were higher and gauges of risk appetite such as European credit spreads showed investors were more willing to take a chance. A growing trickle of borrowers were willing to launch bonds but the mood was at best cautious.


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