Treasurys jump that cause Wall Street crisis escalates.

Has US crisis over?.....

U.S. debt had gains most since September 2001...

Treasurys jumped Monday, pushing yields down by the most since September 2001, as investors clamored for the safety of government debt in the wake of Lehman's bankruptcy, Merrill Lynch's demise and AIG's need for cash.

Two-year note yields dropped 37 basis points, or 0.37%, to 1.86%, the biggest decline since Sept. 17, the first day bonds traded after the terrorist attacks. The yield is the lowest since April.

"It's definitely an extraordinary set of circumstances and I don't know if it's a culmination," said Jason Brady, who helps oversee about $6 billion in fixed-income assets at Thornburg Investment Management. "There isn't a lot of hope that this is going to turn around anytime soon. People would rather own things they don't have to think about so are buying Treasurys."

Bank of America, which absorbed failing mortgage lender Countrywide earlier this year, agreed to buy Merrill Lynch in the hopes of preventing the demise of yet another Wall Street giant.

Lehman filed for Chapter 11 bankruptcy, ending the 158-year-old Wall Street firm's run and rattling the foundation of the global financial system.

"For markets, the question is whether the liquidation of Lehman's illiquid assets will force other dealers to mark down the value of their holdings, resulting in another wave of write-downs and fire-sales that could destabilize markets," said BMO Capital Markets analysts.

Analysts also note the economic ramifications of potentially thousands of layoffs from all four firms because of overlapping positions or attempts to streamline the business. And as financial firms tighten their belts, it will also likely mean less lending to individuals and businesses, slowing down economic activity even more.

Ten-year note yields, which move inversely to prices, dropped 19 basis points to 3.54%.

Interest-rate futures have jumped as traders almost fully expect the Federal Reserve to reduce its benchmark rate at its meeting tomorrow to 1.75% from 2% to make borrowing and lending more feasible for a battered financial system.

"We believe that the gravity of the situation requires a Fed ease of 50 basis points and a removal of the current 25 basis point premium of the discount rate" at which banks can borrow from the Fed directly, said T.J. Marta, income strategist at RBC Capital Markets. "Such a move would put the Fed 'ahead' of the market."

Futures also show an 80% chance of another quarter percentage point cut at the central bank's meeting on Oct. 31.

The Fed also expanded its loan programs for banks and other financial institutions "to mitigate the potential risks and disruptions to markets," Chairman Ben S. Bernanke said in a statement.

The news are from MarketWatch Date: 15th Sept. 2008

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Is US Dollar flooding the whole world? Since near to all most everything are rate in USD......
I guess US should be able to deal with the crisis it just because there isn't any other country that bigger than US economy...in other word if they can't no single one are able bail them out fast.

This will have to take a long time than expected with the many country finance strength.....