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On the radar: St. Louis Fed’s Financial Stress Index retreated for a second week as of October 18

The St. Louis Fed’s Financial Stress Index retreated for a second week, falling to -1.215 in the week ended October 18 after -1.184 in the prior week. It still hasn’t regained all the ground it lost since mid-September, but it suggested that improvement was ongoing. Stock markets had gains, the Fed purchases of Treasury bills contributed to a positive spread for the 3-month yield compared to the 10-year note for the first time in 12 weeks (13 basis points) and the spread between the 2-year note yield and 10-year continued to widen (17 basis points, widest since 17 basis points in Wednesday average of August 2). Confidence that the FOMC will cut rates again at the October 29-30 meeting got a bit of a boost with softer economic data, although it is by no means a certainty.

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