Our benchmark FNMA 6.0% mortgage bond has shown less volatility over the past two sessions while the stock market continues to trade all over the map with huge point swings. The bond traded in a 25bp range and flirted with overhead resistance at $101.87 before settling for a 9bp gain to close at $101.81. The U.S. dollar jumped higher against the British pound and the euro as currency traders believe the Bank of England and the European Central Bank will begin cutting their key interest rates. Compared to our Fed funds rate of 1.5%, the 3.75% rate in the euro-zone countries and the 4.5% rate in Great Britain are high and have room to fall in the current economic situation. A stronger dollar is generally beneficial for U.S. bond prices. However, the Fed fund futures are indicating the Fed will cut our rates by 50bp when the FOMC meets next week and this should weaken the dollar slightly. Crude oil traders are selling oil futures on increasing fear there will be a severe economic recession in the U.S. that will significantly decrease demand for fuels. Crude oil futures plunged $5.45/ barrel to $66.73/ barrel and the dramatic fall in crude oil prices reduces the risk of inflation which in turn provides a better environment for the bond market. The credit markets continue to loosen up with slight improvements seen in the interbank market. The overnight U.S. dollar LIBOR rate continued its trend below the Fed Funds rate with a drop to 1.11% from yesterday's rate of 1.28%. Usually, the overnight LIBOR closely approximates the Fed Funds rate, currently at 1.50%. The 3-month LIBOR continued its downward path for the eighth consecutive day by falling to a rate of 3.54% from Tuesday's level of 3.83%. Today's LIBOR/OIS spread has risen slightly to 2.74% from Tuesday's 2.70%. The Fed announced they are raising the interest rate it pays banks that deposit excess cash reserves at the central bank. The new rate will be the fed funds target rate less 0.35%. The old formula was the fed funds rate less 0.75%. The Fed said the new rate 'would help foster trading in the funds market at rates closer to the target rate.' Lower corporate earnings guidance, the surge in the U.S. dollar, and plunging oil and commodity prices are signaling a global economic slowdown at best and a possible severe global recession at worst. Hedge funds and mutual funds are getting hit with record redemption requests causing extensive selling of stocks. A record $75 billion worth of redemptions in September has reportedly already been exceeded during the first two weeks of October. The Dow continued its losing ways with a 514 point loss to finish at 8,519 while the broader S&P 500 Index tumbled 58 points to close at 896. The NASDAQ Composite Index lost 80 points to end at 1,615.