Rally Hats On

Green screens across the globe, as they say. Details are still sketchy, but a global bailout of banks with promises of "unlimited liquidity" in the US and global interbank lending guarantees in the Eurozone seem to have stopped the hemorrhaging...for now.

Major central banks pledged on Monday to pour unlimited amounts of dollars to unblock frozen credit markets, as governments around the world announced measures to prop up ailing banks.

"The BoE, ECB, and SNB will conduct tenders of U.S. dollar funding at 7-day, 28-day, and 84-day maturities at fixed interest rates for full allotment," the Federal Reserve said in a statement.

"Funds will be provided at a fixed interest rate, set in advance of each operation," it added.

The sizes of the reciprocal currency arrangements (swap lines) between the Fed and the Bank of England, the European Central Bank and the Swiss National Bank will be increased to accommodate whatever quantity of U.S. dollar funding is demanded, the statement also said.

UK Prime Minister Gordon Brown wants to go even further, saying publicly that he wants a second Bretton Woods agreement to establish the new financial order of things, as was done after WW II.

An agreement like that will be needed and soon, which is the first really good idea I've heard a world leader propose this week. The problems: the LIBOR rates and TED spread barely budged downward this morning. Banks STILL are taking a wait and see attitude. While stocks may be taking a breather, it's going to take far more specific details to convince banks to lend, especially since there's no bound guarantee that any of the EU nations will agree on the Paris Plan.

Once again the real action is going to be in the bond markets this week (they are closed in the US and Japan today). If the LIBOR rates drop and the TED spread finally shrinks significantly, that will be an excellent sign. But banks are seeing the devil the in details, and so far the details are short in supply.

Most likely this is just the eye of the storm.