Robert Holmes
The recent surge in the value of the Japanese yen was partly to blame for the heavy declines in Asia. The yen is at its highest against the dollar in over a year.
Robert Pavlik, chief investment officer with Oaktree Asset Management, said the Fed's move may not be the end of the selling pressure. "This has stemmed the downward pressure for now, but this is the discount window and not the fed funds rate," said Pavlik. "Mortgage loans are not tied to the discount window. This doesn't help the individual consumer because it doesn't completely straighten out the subprime mess. It's not necessarily going to bring back the market liquidity that helped finance all the leveraged buyout and private-equity deals." Ian Shepherdson, chief economist with High Frequency Economics, said that traders can only speculate, but "the decision to move the primary discount rate rather than the fed funds rate may indicate that the Fed anticipates some institutional failure ... probably not a bank, but rather an institution that has substantial bank liabilities that may not be able to clear." U.S. Treasury bonds, which had been a safe haven for investors as the major averages slid dramatically this week, were losing ground late. The 10-year note was lower by 2/32 in price, raising the yield to 4.67%, and the 30-year bond was down 22/32, yielding 5.00%.
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