In a surprise, [The Federal Reserve] dramatically increased the amount of money it will create out of thin air to thaw out the still-frozen credit markets that have cramped lending to consumers and businesses alike.
Indeed, the immediate effect on the bond markets was striking, with prices rising and yields dropping sharply on the news. The yield on the 30-year Treasury bond, about 3.75 percent before the announcement, fell quickly to 3.4 percent and remained volatile. At the same time, the dollar plunged about 3 percent against other major currencies.
Edmund Andrews, "Fed to Buy $1 Trillion in Securities to Aid Economy"; The New York Times (3/18/09)
Today's big financial news was the Fed's decision to buy up to $1 trillion in bonds and mortgages. Mortgage rates reacted immediately; the sites I monitor showed a .25% drop, to 4 5/8%.
Guesstimates are that rates could fall another .25%, which would take them under 4.5%.
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