With rates markets just about pricing in the....>

FED: With rates markets just about pricing in the Fed to reach ZIRP by next

week, focus is on action that may be taken prior to next Wed's decision.

- Fed's boosting of repo ops announced yest is a small step toward alleviating

short-term market squeezes, but broader dislocations in Tsy markets mean that

the stage is set for much more substantial action.

- Inflation exps have cratered to all-time lows, raising real rates and making

the Fed's challenge of manoeuvring at the ZLB even tougher.

- Deutsche today: "action before the meeting cannot be ruled out, and may be

coupled with an announcement related to other tools including balance sheet

expansion. Such a decision would be consistent with NY Fed Pres Williams's ethos

that, in a world of structurally low rates, the Fed should not keep its powder

dry when responding to a significant adverse shock."

- BofAML, citing wide bid-offer spreads in Tsys and cheapening of Tsys vs OIS:

Treasury mkt "functioning materially deteriorated over recent days and likely

requires a rapid and large near-term policy response" from the Treasury / Fed.