1932 GMT [Dow Jones] Following the Fed rate cut, John Miller, vp of portfolio management at Nuveen Investments, says that "the environment actually feels a little better so far this week, even though the week is very early." Miller says that could be in part because investors have interpreted the Fed action over the weekend as policymakers being "supportive of keeping the major broker dealers healthy." Miller says the critical issue is to resolve the freezing of the credit markets sooner rather than later "because we're starting to see the real fallout that it can have on the economy and the job market." Fed action "seems like it's starting to have a positive impact," Miller said. As for a sign that markets are truly out of the woods, Miller said that he's looking for a narrowing of credit spreads and improved overall volume of secondary market transactions and primary market issuance. That would be "a sign that we've turned the corner," he said. (DLB)
1927 GMT [Dow Jones] The widely watched and traded U.S. investment-grade credit derivatives index, the Markit CDX IG 9 index, is back to unchanged at 165 bps after pushing 4.5 bps wider on the Fed 75-bp rate cut, according to broker Phoenix Partners Group in New York. Investors had been expecting a 100-bp cut. (RV)
1925 GMT [Dow Jones] The dollar waffled a bit after the FOMC decision, but all in all seems to have benefitted by the Fed's less-than-expected rate cut. The 75 bp cut means the dollar's rate differential disadvantage versus the euro is not as large as markets were expecting, which is an overall positive for the greenback. Tuesday afternoon, the euro was at $1.5713 from $1.5742 late Monday, while the dollar was at Y98.94 from Y97.59. The euro was at Y155.54 from Y153.68, according to EBS. The U.K. pound was at $2.0174, from $2.0014, and the dollar was at CHF0.9894 from CHF0.9871 Monday. (DKM)
1919 GMT [Dow Jones] So far this year the Fed's given us 200 basis points of cuts and a load of acronyms, the TAF, TSLF, PDCF, and the 28-day term RP program - all clearly underscoring Fed's concerns about credit markets and potential for financial instability, says Bear Stearns in note. Despite building inflation pressures, the firm continues to forecast at 50 bps cut on April 30. (ML)
1916 GMT [Dow Jones] The agency debt market tightened across the board in expectation of the Fed cut Tuesday but soon caught up to the disappointment from other markets to trace back some gains. The 10-year reference notes traded +70 BP before Fed, which was 28 bps better than Monday's close. The issue moved to 79 BP post Fed and are now 73/71, according to Jim Vogel of FTN Financial. (NPN)
1911 GMT [Dow Jones] Following the Fed decision, short breakevens have seen a bit of a pop as oil and gasoline prices moved higher after the ease. Ahead of the Fed cut, longer breakevens were already up significantly on the day and have moved a bit higher since the decision, says Mike Pond, Treasury and inflation linked strategist at Barclays Capital. Monday, 10-year breakevens were down 16 bps in the day's flight to quality rally. "We've had a sharp correction from yesterday's underperformance," Pond said. The on-the-run 5-yr is up 14bps on the day at 2.12 and the 10-yr is at 2.41, up 16bps on the day. "We have seen very strong demand (in TIPS) after the underperformance of the past couple days, particularly in the 10-yr sector," Pond said. And if nominals continue to sell off, breakevens should head even higher, he said. Further ahead, if the Fed continues to "cut rates depite inflation pressures" breakevens would continue to push higher. (DLB)
1911 GMT [Dow Jones] The widely watched and traded U.S. investment-grade credit derivatives index, the Markit CDX IG 9 index, is quoted at 166 bps, as it tracks movements in stocks, according to broker Phoenix Partners Group in New York. That's only slightly wider from its pre-Fed level. The index had opened at 174 bps.(RV)
1908 GMT [Dow Jones] Canadian bonds ending moderately lower, with the negative tone mostly attributable to gains for North American stock markets. Fed's aggressive 75 basis point interest rate cut caused only minor market ripples, but prospect of further cuts and deepening U.S. economic weakness expected to keep Canadian bonds underperforming Treasurys. Yield on benchmark Canada 10-year bond rises to 3.46% from 3.42% late Mon. (PE)
1906 GMT [Dow Jones]"There's very little to be done, except to let what has been done to work itself through the system," said Zane Brown at Lord Abbett about efforts to alleviate the credit crisis. That will take months. Only a bailout in the form of ridding banks and brokers of toxic securities to be sold through a clearing house would cause a dramatic improvement in financial markets, he said. (RV)
1900 GMT [Dow Jones] "You can't characterize it as a dramatic response," said Zane Brown at Lord Abbett about the 4.5 bps widening of the Markit CDX IG9 to 170 bps after the Fed cut. He noted the index had seen significant tightening earlier. "I characterize it as minor disappointment on the part of some investors...I think perspective is in order."(RV)
1902 GMT [Dow Jones] The 75 bps cut shows that Fed believes that rate cuts alone "cannot do all the heavy lifting when it comes to righting the tipping economy," says Chris Rupkey of Bank of Tokyo-Mitsubishi. "The committee shows the first signs today of digging in their heels and saying enough is enough," he wrote, noting that in the background, there must have been some concerns that a 1% fed funds rate in 2003 was after all responsible for the housing bubble. But he also notes, "it's a confidence game." (ML)
1900 GMT [Dow Jones] Commercial mortgage-backed securities gave up some of their day's gains, unhappy that the Fed didn't go all the way to 100 bps. Risk premiums on the Markit CMBX AAA 4 lost 10 bps vs Tsys. This dented the earlier gain that pushed the index to 225 from Monday's close of 262. (NPN)
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