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While no one's exactly sure what the House's rejection of the $700 billion bailout plan means for the economy yet, there were some immediate effects showing themselves in financial markets Monday. Aside from the 600 point to 700 point hammering of the stock market, credit markets also reacted adversely as investors rushed to take refuge in Treasury bills and banks jacked up the costs of lending to each other.
The yield on two-year Treasury notes fell 39 basis points, or 0.39%, to
1.71%. Meanwhile short-term borrowing costs for banks jumped as banks considered hoarding cash and become ever less willing to lend to each other. Overnight LIBOR for dollars rose to 2.57% from 2.3%, while three-month LIBOR jumped to 3.88% from Friday's 3.76%. -
George White
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