Markets Surge On News Of Bank, Bond Insurance Relief

The markets are flying this morning on the news that Warren Buffett sent an offer to the mortgage insurers (MBI, ABK) to reinsure their municipal bond holdings, a liability of roughly $800 million. This would help them maintain their AAA rating, but it does not include their CDO portfolios, or other securities.

As such, one of them has already turned him down. This would be a sweet deal for Buffett, but if they don't accept it, it is hard to see how long this enthusiasm lasts. There is also a press conference being held this morning to discuss a plan to help deliquent homeowners.

Treasury Secretary Paulson is getting ready to speak to outline the details. But basically it is supposed to include up to 6 major lenders, and freeze foreclosures while the banks help come up with loan modifications.

The combined news is helping the bank index lead the way today, +2.90% as of now. Oil stocks are also up over +2.0% on another rise in oil, currently near $94.

Asian markets were up overnight, while the Yen is lower today. I want to see the FXY break the $92.50 level to signal a new downtrend. And bond yields are nicely higher, with the 10-year yield up 10 basis points to 3.72%.