Our benchmark FNMA 4.5% bond fell 28bp to close at $101.66 while trading within an expanded 137bp intra-day range. The bond showed early upward momentum following yesterday's huge rally but fell to profit taking later in the session as volatility picked up. Mortgage bonds have a history of spiking higher on significant Fed rate cuts only to temporarily sell off in the days that follow. The financial markets spent most of the day pondering future outcomes of the Fed's latest monetary policy. Commercial banks responded by immediately dropping their prime lending rate by 75bp to 3.25%, the lowest rate in over 50 years. This will help millions of business and consumer borrowers. The Fed has also offered to lend up to $200 billion to support securities backing car loans, credit card loans, and student loans. Another expected outcome is lower mortgage rates. Conventional 30-year mortgage rates may fall to around 4.50% from their current average level of 5.47% in the months ahead. The 3-month U.S. dollar LIBOR rate fell to 1.58% from 1.85% yesterday following the Fed's rate cut. Before the credit crisis hit, the 3-month U.S. dollar LIBOR usually traded within 50bp of the official Fed funds rate. We'll know the credit crisis has fully eased when this 50bp relationship has been restored. Stock prices swung back and forth between positive and negative territory before finishing lower. Morgan Stanley reported larger than expected losses of $2.30 billion in the fiscal 4th quarter vs. estimates for a loss of $298 million. Morgan Stanley's earnings troubles along with those of Goldman Sachs $2.12 billion loss posted yesterday weighed on the stock market as traders are quick to sell rallies to lock in profits during this bear market. The Dow fell 99 points to close at 8,824 while the broader S&P 500 Index retreated 8 points to end at 904. The NASDAQ Composite Index gave back 10 points to finish at 1,579.