After receiving $5 billion in funding from the Treasury's Troubled Asset Relief Program, GMAC pledged to resume its auto-financing operations immediately. It said it will modify its criteria to include retail financing for customers with credit scores of 621 or higher.

As a result of the 8 a.m. EST announcement, equities got an initial boost at the 9:30 a.m. EST open. The Dow Jones industrial average never touched below session-open levels during the session and closed up 184 points to 8668. The S&P 500 closed up 21 points to 891 and the Nasdaq closed up 40 points to 1551.

IHS Global Insight chief U.S. financial economist Brian Bethune wrote in a research note that he believes the news to be an especially significant, considering the economic challenges the U.S. has endured over the past few months.

"GMAC now has access to near zero cost funds from the Federal Reserve, and the much higher level of capitalization should reduce GMAC's term borrowing costs," he wrote. "These developments will substantially ease the upward pressure that we have seen on auto loan borrowing spreads, and provide greater access to auto loan credit for American households."

European stock markets closed in positive territory with the Eurostoxx up 42 points to 2065, the UK FTSE 100 up 73 points to 4393 and the German DAX up 105 points to 4810.

U.S. Treasury yields surged to session highs on the GMAC news, but have since retraced gains. U.S. two-year yields are down 3.9 bps to 0.73%, with five-year yields up 1.0 bps to 1.46%, 10-year yields down 1.8 bps to 2.08% and 30-year yields down 6.5 bps to 2.57%. The Eurodollar March 09 contract is up 6.0 ticks to 98.97. The yield curve is steeper, with the 10/2-year spread up 2.0 bps to 134.44 bps.

The Canadian 10-year note is yielding 59.34 bps more than the U.S. 10-year note.

Yields on two-year Canadian government bonds are down 1.3 bps to 1.10%, with five-year yields up 2.0 bps to 1.69%, 10-year yields up 5.6 bps to 2.67% and 30-year yields up 2.4 bps to 3.42%.

In Germany, returns on two-year German bonds are up 4.6 bps to 1.76%, with five-year yields up 4.2 bps to 2.32%, 10-year yields up 4.1 bps to 2.95% and 30-year yields up 5.0 bps to 3.53%.

Yields on UK two-year bonds are down 7.1 bps to 1.11%, with five-year yields down 5.2 bps to 2.51%, 10-year yields down 1.1 bps to 3.09% and 30-year yields flat at 3.76%.

The Canadian dollar is down 0.0002 to 0.8192 against the U.S. dollar (1.2207 USD/CAD) and down 0.30 to 73.99 against the yen. Despite the equity-market gains, the U.S. dollar is down 0.33 to 90.35 against the yen.

Gain Capital chief currency strategist Brian Dolan said a traditionally safe-haven currency such as the yen is up against the dollar because the cross trades in relation to U.S. yields.

"Those are down and we are coming down to end-of-the-year trading so movements have been very much range-bound and confined, but I would attribute that mostly to the Treasury yields being a bit lower," he said.

The euro is up 0.0142 to 1.4068 against the U.S. dollar, up 0.0173 to 1.7174 against the Canadian dollar, up 0.0074 to 0.9749 against the pound sterling and is higher by 0.80 to 127.07 against the yen.

The pound sterling is up 0.0040 to 1.4431 against the U.S. dollar and up 0.0054 to 1.7616 against the Canadian dollar.

West Texas Intermediate crude oil is down $0.70 per barrel to $39.32, despite reports from out of the Middle East that Israel is on the verge of a military offensive against Hamas.

Natixis economist Thierry Lefrancois wrote that there is the potential for a recovery in oil prices in the medium term despite current market bearishness.

"The Israeli-Hamas conflict helped to boost prices but the absence of reaction in the rest of Middle-East drives oil prices down again, in spite of weak dollar and cold temperatures," he wrote. "OPEC members want to take actions to stabilize oil prices at a better level ($75/bbl). Higher non commercial net long positions could be a 1st sign of oil recovery, even if economics news will remain gloomy in 2009."

Oil was range-bound after climbing off session lows of $37.91 reached at 11:15 a.m. EST. Meanwhile, the front month gold contract at the Chicago Board of Trade was down $7.70 per ounce to $872.70.

Toronto's commodity-heavy S&P/TSX composite index closed up 196 points, or 2.25%, to 8830.

All data taken at 4:06 p.m. EST.

By Ryan Szporer, This email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Erik Kevin Franco, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Stephen Huebl, This email address is being protected from spam bots, you need Javascript enabled to view it

CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca

The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.

A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.