Market Graphic - The Fed's firebreak

The Fed's firebreak should hold, as at the core of the Bear Stearns collapse was a failure in the repo market. The Fed's extension of immediate financing to brokers for a broad range of collateral significantly reduces the potential for a replay of a Bear Stearns scenario, in our view. Additionally, the Fed's action clearly shows a preference for debt-friendly solutions; hence, we would expect credit spreads to decouple significantly from equity prices in the future.*

A new financial order: de

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