Treasury prices have fallen in the last few days, ending an unstoppable run that drove Bond prices sky high, leaving benchmark 10 year note to yield 3.83 . The bull market for bonds was created as Investors feared economic hardship due to energy and mortgage markets.
However, word on the street has the Fed lowering prime interest rate at least 1/4 when they meet tomorrow. Lowering the prime interest rate traditionally provides more liquidity in the system, boosting the economy.
Prime interest rate currently sits at 4.5% , down 3/4 of a point since the Fed halted its historic run of 17 consecutive rate increases. Many experts suggest Bernanke was too hawkish on rates and inflation, while ignoring blatent indicators driving the economy, noticably the coming housing crisis. He is expected widely to continue focusing on the enomony much of 2008.
Wall st is infamous for not even waiting until Bernanke makes his announcement. The dow has gained several hundred points in the last few days, in spite of some weak economic indicators. This has led to downward pressure on Treasuries, leaving the 10 yr note yielding 4.15% at Mondays close.
