Craig,

Looking at this in an historical context, in previous economic downturns when the labor market was a casualty, the FOMC did not raise the Fed Funds rate until at least six months after the labor market improved.

Although Fed policymakers, economists, traders, and market watchers in general all have varying opinions about the shape of the recovery (V, W, L, U, SQUARE ROOT), there is one thing everyone's forecast has in common..UNCERTAINTY! No one knows whether or not the 'improvements' have been a function of record low Fed Funds policy and government stimulus.

Jobs are still being cut, the labor market has yet to prove it is stable and ready for job creation....

We feel confident that Ben Bernanke and his circle of highly educated economists are well aware of this and therefore not willing to risk all the progress they've made over the past year. Given the bond market's extremely sensitive position in the short end of the  yield curve, we don't believe the Fed will risk a BLACK WEDNESDAY event by implying that they are considering a rate hike.

Plain and Simple:  we dont think rates are going to skyrocket because of the FOMC statement.

Respectfully, 
AQ

PS....

Here is the September FOMC statement....

Federal Reserve Press Release

Release Date: September 23, 2009
For immediate release

Information received since the Federal Open Market Committee met in August suggests that economic activity has picked up following its severe downturn.  Conditions in financial markets have improved further, and activity in the housing sector has increased.  Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.  Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales.  Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.

In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability.  The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.  To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt.  The Committee will gradually slow the pace of these purchases in order to promote a smooth transition in markets and anticipates that they will be executed by the end of the first quarter of 2010.  As previously announced, the Federal Reserve’s purchases of $300 billion of Treasury securities will be completed by the end of October 2009.  The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets.  The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.

The FN 4.0 is +0-01 at 98-06 yielding 4.187% and the FN 4.5 is +0-01 at 100-27 yielding 4.399%. The secondary market current coupon is 4.335%.

The 10yr TSY is -0-12 at 100-30 yielding 3.51%

The S&P is +9.74 at 1055.

The Dollar Index is -0.71% at 75.847

Next Event: 215pm FOMC Statement. Tic Toc