Fed Cuts Discount Rate by 1/2 Percent

The Fed made a "surprise" cut in the discount rate - the rate it lends to banks at - of 1/2 percent this morning. The stock futures went crazy to the upside (NDX up 40 points). Interestingly, 10 and 30 year bonds futures fell sharply indicating expectations of higher future inflation. The Fed has not moved their main target the Federal Funds Rate. Yesterday, 90 day T-Bills were trading at yields in the mid 3% range. I think this is due to some money market funds having problems due to investing in short term corporate bonds that have fallen sharply in value or mortgage related instruments. Even those yields are rising today. Interesting that the Fed chose options expiry day to take this action...