Vital Market Signs At Earlier FOMC Meetings
April 29, 2009
| EUR/$ | $/JPY | 10Y, % | DJIA | Oil, $ | |
| 06/30/04 | 1.2173 | 109.44 | 4.63 | 10396 | 37.95 |
| 06/30/05 | 1.2090 | 110.89 | 3.96 | 10370 | 57.00 |
| 06/29/06 | 1.2527 | 116.07 | 5.20 | 11077 | 73.41 |
| 06/28/07 | 1.3452 | 123.17 | 5.10 | 13456 | 69.82 |
| 08/07/07 | 1.3749 | 118.55 | 4.73 | 13510 | 72.27 |
| 09/18/07 | 1.3888 | 115.75 | 4.51 | 13475 | 81.42 |
| 10/31/07 | 1.4458 | 115.28 | 4.42 | 13873 | 93.59 |
| 12/11/07 | 1.4682 | 111.49 | 4.11 | 13645 | 89.78 |
| 01/30/08 | 1.4792 | 107.31 | 3.70 | 12454 | 91.70 |
| 03/18/08 | 1.5786 | 98.73 | 3.41 | 12257 | 107.53 |
| 04/30/08 | 1.5562 | 104.58 | 3.83 | 12953 | 111.54 |
| 06/25/08 | 1.5568 | 108.37 | 4.18 | 11837 | 133.62 |
| 08/05/08 | 1.5445 | 108.42 | 3.97 | 11484 | 119.82 |
| 09/16/08 | 1.4144 | 105.16 | 3.36 | 10936 | 91.18 |
| 10/08/08 | 1.3625 | 99.87 | 3.50 | 9447 | 87.02 |
| 10/29/08 | 1.2933 | 97.15 | 3.81 | 9145 | 67.38 |
| 12/16/08 | 1.3790 | 90.14 | 2.52 | 8687 | 44.14 |
| 01/28/09 | 1.3253 | 90.01 | 2.61 | 8356 | 42.92 |
| 03/18/09 | 1.3115 | 98.13 | 2.94 | 7340 | 47.73 |
| 04/29/09 | 1.3265 | 96.97 | 2.99 | 8164 | 50.90 |
The FOMC statement unveiled more dramatic quantitative easing with a plan to buy $300 billion of longer-dated Treasuries over six months, a doubling of planned agency bond purchases, a 67% increase in planned mortgage-backed securities to be purchased, and an expanded range of TALF collateral. Those actions produced an electrifying market movements. Within two hours of the announcement at 18:18 GMT, the dollar had dropped by 2.7% against the euro, 2.0% against the Canadian dollar, and 1.9% against the yen. The yield on ten-year Treasury bonds had slumped 44 basis points to 2.50%, and the DOW and Nasdaq rallied by 2.0% and 1.3%. Oil prices rose 3.1%.
In the ensuing six weeks amid signs that the economy may be contracting less sharply in 2Q, the DOW has advanced by a further 11.2%, oil has surpassed $50, and the ten-year yield has increased back to its pre-announcement level plus five basis points. The dollar is not far from its levels on March 18th. With its switch to quantitative easing, no further cut in central bank rates have been engineered in 2009, but the target midpoint of 0.125% is 513 basis points below the pre-crisis peak on the Fed funds rate of 5.25% in the summer of 2007. Analysts anticipate fewer surprises in today’s FOMC statement than in the prior one. One main point of quantitative easing is to depress longer-term interest rates. In that regard, not that the 10-year Treasury yield since September 16th, that is since the collapse of Lehman Brothers, has dropped on balance just 37 basis points, much less than the 188-basis point decline of the Fed funds rate.
Copyright 2009 Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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