NEW YORK (AP) -- Short-term Treasurys rallied sharply, sending a signal that investors expect further rate cuts, after the Federal Reserve on Tuesday reduced the overnight bank lending rate to 3.5 percent.
The rate cut of 0.75 percentage point followed massive selloffs on global stock exchanges Monday. The market routs reflected growing consensus that the U.S. economy was on the brink of recession and could lead to weaker performance elsewhere.
Tuesday's unexpected announcement came one week before the committee's regularly scheduled policy meeting.
"The Fed has cut the funds and discount rates by 0.75 percentage points, citing the weakening economic outlook ... the deterioration in the markets and tighter credit conditions," said Ian Shepherdson, chief U.S. economist at High Frequency Economics. "But there can be little doubt the Fed would have waited until the meeting next week if it had not been for the state of the markets."
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http://biz.yahoo.com/ap/080122/bonds.html?.v=6
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