Day In Review:
• US announces $250bln plan to rescue banking system and FDIC stated it would fully guarantee newly issued, senor unsecured debt from select banks
• Market responds positively to response, but equities retrace on only modest improvement in LIBOR, concern about corporate earnings and economic conditions going forward
• Yields on Fannie Mae and Freddie Mac corporate debt widened on the back of the government guarantee of banks
• Bank of New York Mellon was named by the US Treasury to provide custodial services to administer TARP program
• ECB President Trichet urged policymakers to restore the discipline that characterized markets in the immediate post WW-II world. Trichet implied that slower growth in the EU region may pave the way for further rate cuts.
Day Ahead:
• Major event risk for the day will be the resetting of LIBOR fixings and the LIBOR-OIS spread. We expect price action in markets to be shaped by where LIBOR and credit spreads settle
• Fed Chair Ben Bernanke will speak before the Economic Club of New York on the economic outlook and the financial markets
• Heavy slate of macro-data on tap will include the PPI, advance retail sales, and Empire Manufacturing Survey all for September
