Friday, March 21, 2008

Fed to Auction $75B in Treasuries.

Thursday was a good day for the market, as both oil and gold prices fell. Perhaps even more encouraging was the news that the Fed will auction $75 million in securities to banks next week. Will this have a lasting effect on the economy? Hard to say, though investors are certainly more confident right now.

The market reflected another change on Thursday. The Dow Jones rose over 260 points (2.2%), the Standard & Poor's 500 index rose 2.4%, and the Nasdaq rose 2.2%. It was a welcome relief for everyone, no doubt. The Dow lost almost 300 points the day before, costing investors almost all of their previous gains.

The roller coaster ride will stop for several days, but analysts are confident that the stock exchange will open to the same optimism when it opens its doors on Monday. Following the good news this week, the US dollar has strengthened and the manufacturing sector has stabilized.

With $75 million in Treasury securities due next week, investors will be able to use some of their more high-risk investments as collateral in a series of weekly auctions. Investment houses can borrow up to $200 billion in stable securities, which will bring welcome relief to the mounting credit crisis.

Acceptable forms of collateral include agency collateralized mortgage obligations (CMOs), AAA/Aaa-rated commercial mortgage-backed securities (CMBS), AAA/Aaa-rated private-label residential mortgage-backed securities (RMBS) and OMO-eligible collateral.

Related tickers: (SPY), (DIA), (QQQQ),


Heather Johnson is a freelance business, finance and economics writer, as well as a regular contributor at Business Credit Cards, a site for best business credit cards and best business credit cards offers. Heather welcomes comments and freelancing job inquiries at her email


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