Fed Cuts and Rates Rise: Bond Vigilantes

Ben 'Helicopter' Bernanke cut and he cut hard... the Bond Vigilantes came and and raised rates on everything along the curve.

The curve steepened as intended, and this will eventually help the banks. However, if yields continue to rise are simply ignore further cuts, then the strapped consumers won't see the benefits of a lower Fed funds rate. Looks like mortgage rates won't be coming down as intended...

U.S. Initial Jobless Claims Rose to 375,000 Last Week (Update1) : "The number of Americans filing first-time claims for unemployment benefits rose more than forecast last week to a 27-month high, evidence of a weakening job market.

Initial jobless claims increased by 69,000 to 375,000 in the week ended Jan. 26, the Labor Department said today in Washington. The increase in claims was the biggest since just after Hurricane Katrina in September 2005. A separate report from Labor showed employment costs rose 0.8 percent in the fourth quarter of 2007, the same as in the prior three months."

That was a little bit of a surprise as well. S&P went from 1344 to 1331 on the news this morning. Looks like the begining of an ugly day.

"Last week's figures were distorted by difficulties adjusting for the Martin Luther King holiday, when state unemployment offices were closed, a Labor Department spokesman said. Total benefit rolls have been moving steadily higher since September, signaling a slowing job market and raising the odds the economy may be on the verge of a recession, economists say."

Looks like traders are taking the 'seasonality' arguement at face value.