Easier Credit Lowers Odds Of Rate Cut --- But Many Bets Are On For Fed to Ease More
Things are better in the bond markets, but maybe not good enough for the Federal Reserve, which meets tomorrow to set the future of interest rates.</br></br>Traders and investors in various parts of the bond market have had much to cheer in recent days. Liquidity, or the ease of trading, has substantially improved in many sectors since the Fed cut interest rates Oct. 15. And the difference in yields between risky bonds and safer Treasurys has narrowed, indicating investors feel more comfortable with riskier assets, helping to avert what seemed like a looming credit crunch.</br></br>Issuance of corporate bonds is suddenly back on track, highlighted by Sprint Corp.'s sale of $5 billion in bonds last week, the second-biggest corporate-bond deal on record. The issuance followed the successful sale of $4.8 billion of bonds by Associates Corp. of North America, a unit of Associates First Capital Corp., on Oct. 27.</br></br>Meanwhile, money began to flow in the past two weeks into high-yield and emerging-market bond funds, which could lead to higher bond prices -- and thus, lower yields -- in the months ahead.</br></br>In addition to the vast improvements in the credit markets, Friday's reports of stronger-than-expected increases in retail sales and producer prices make it less likely the Fed will cut interest rates when it meets tomorrow.