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Banks Rock for Third Straight Session: Financial Winners

There has been quite a bit of coverage of Federal Reserve stimulus policy, which will ramp up again next week, in anticipation of the next meeting of the Federal Open Market Committee on Sept. 17-18, followed by the FOMC's policy statement. Many economists expect the central bank to make small reductions in its purchases of long-term mortgage-backed securities and U.S. Treasury bonds. These purchases have totaled $85 billion per month since last September, as the Fed has attempted to hold long-term rates down. The market in anticipation of a curtailment of bond purchases has sent the yield on 10-year Treasury bonds by 129 basis points since the end of April.

The yield on the 10-year bond rose sharply by 10 basis points on Thursday to 2.99% -- its highest level in more than two years.

But the Fed's main policy tool is the short-term federal funds rate, which has been kept in a range of zero to 0.25% since late 2008. The FOMC has said repeatedly said it will likely be appropriate to maintain its "extraordinarily accommodative" policy for short-term rates at least until the nation unemployment rate drops below 6.5%, making Friday's unemployment rate a critical number for investors.


-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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