Federal Reserve has ramped up its interest rate on emergency loans

N

Nighthawk

Federal Reserve:



  • Announces its bank term funding program will cease making new loans as scheduled on March 11
  • Adjusts interest rate on new BTFP loans to be no lower than interest rate on reserve balances on day loan was made
  • New rate on BTFP loans effectively increases rate by nearly 50 bps; change is effective immediately
  • Says change to BTFP rate ensures the program continues to support its goals in current rate environment
The TL/DR on this is that the BTFP program had been open to arbitrage abuse, involving borrowing at a lower rate using high-quality collateral and potentially investing or lending that capital at a higher rate.


https://www.forexlive.com/centralba...ts-interest-rate-on-emergency-loans-20240125/
 
Last edited:
Sergio123 said:
So what will be the new 4 letter acronym for the bank bailout program?
More...

The message is: no easy money anymore for banks & their hedge fund clients. Both were playing games with spot/futures arbitrage leveraged to the hilt. It was about time for the FED to stop this mockery.
 
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Reuters
 
Nighthawk said:
Federal Reserve:



  • Announces its bank term funding program will cease making new loans as scheduled on March 11
  • Adjusts interest rate on new BTFP loans to be no lower than interest rate on reserve balances on day loan was made
  • New rate on BTFP loans effectively increases rate by nearly 50 bps; change is effective immediately
  • Says change to BTFP rate ensures the program continues to support its goals in current rate environment
The TL/DR on this is that the BTFP program had been open to arbitrage abuse, involving borrowing at a lower rate using high-quality collateral and potentially investing or lending that capital at a higher rate.


https://www.forexlive.com/centralba...ts-interest-rate-on-emergency-loans-20240125/
More...
%%
Good read;
+ they noted the purpose + why its no longer needed.
I thought that was bit strange when they first included hedge funds; but i'm no central banker/ so no worries on that.
AIG found out the hard way, some bank or insurance co rescue may not be so fun;
but they finally settled the complex court cases on that.
 
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