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U.S. corporate bonds signal beginning of credit thaw

By JC | December 19, 2008

Following the news lately the consensus seems to be that 1) The US Economy will be in a deeper recession and 2) The Stock Market might soon be bottoming out. The credit market may be one place to look for hope. U.S. corporate bonds are scoring a major rally as the interest rates on the risk-free assets are being pushed to zero by the Federal Reserve. Investors, looking for some kind of return are flocking into U.S. Corporate Bonds. In John Lonski’s, chief economist at Moody’s, words: ‘These extraordinary efforts by the Fed to steady the economy, to thaw out financial markets might finally be working.’ Not everyone sees things as clearly though; The Minneapolis Fed Finds ‘Credit Vertigo’ Holding Down Lending while a panel was told that the Federal bank bailout isn’t trickling down. Whatever the case may be, Tuesday’s Historic rate cut by the Federal Reserve will not be in vain and investors should prepare themselves as investing opportunities like this may not return once the dust settles.

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