Hey look, fed auctioned TAF funds at 2.8%!

http://www.forbes.com/markets/feeds/afx/2008/03/11/afx4757749.html

Fed auctions portion of 50 bln usd March TAF at 2.8 pct, below fed funds rate

WASHINGTON (Thomson Financial) - The Federal Reserve said it successfully auctioned off 50 bln usd to banks yesterday under its new Term Auction Facility and for the first time auctioned off funds at an interest rate below 3.0 pct.

The Fed said the lowest interest rate accepted at the auction was 2.8 pct, well below the current federal funds rate of 3.0 pct.

The Fed has used its new TAF auction system since December to deliver funds to banks in need of liquidity, and generally has offered these funds at a rate that is somewhere between the fed funds rate and the higher discount window rate, which now stands at 3.5 pct.

In late January, the Fed auctioned some of its TAF funds at a rate lower than the fed funds rate, just before before the Fed lowered the target rate by a half-percentage point. Regardless of whether today's announcement is a firm signal of another pending cut, many economists already expect the Fed to lower the fed funds rate again when it meets next week.

The Fed last week announced it would expand the TAF to 100 bln usd per month, up from the 60 bln usd per month auctioned in January and February. The next March TAF auction, again for 50 bln usd, will be held on March 24.

pete.kasperowicz@thomson.com

pik/wash/ms1

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Has anyone read up on this stuff?

If phone lines are congested as the Closing Time for Bid submission approaches, an Authorized Submitter can leave a message on the Reserve Bank’s discount window telephone hotline voicemail identifying clearly his/her/their name(s), the name of the institution on whose behalf (s)he/they is/are calling, his/her/their contact phone number and the complete Bid information. After leaving such voice message, the Authorized Submitter(s) should continue calling the discount window telephone hotline until successfully reaching a Local Reserve Bank’s discount window staff. Note that the burden is on the Participant to try to reach and submit a Bid in a live phone call with a Local Reserve Bank discount window staff. Bids left on a voice mail will not be deemed submitted unless confirmed in a telephone call with a Reserve Bank Discount Window staff member. The voicemail with complete and accurate Bid information will be used by the discount window staff as evidence that a Participant made a good faith effort in trying to submit a Bid by telephone before the Closing Time.
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Reserve Bank’s discount window telephone hotline identifying clearly his/her/their name(s), the name of the institution on whose behalf (s)he/they is/are calling, his/her/their contact phone number and the complete Bid information.

"Yo Ben, your phone's been busy all day man. This is The Kin over at ET. I'm gonna need a couple billion because I'm in a bit of a credit crunch. Please wire directly to my bank account ASAP."

Seriously, is that all that's needed to create money out of this air. It's only a matter of time before someone scams the Fed and ways away with a few billion dollars.


"Reserve Bank’s discount window telephone hotline voicemail"

Anyone got the number? 1-800-BERNANKE
 
Quote from crgarcia:

Banks borrow at 2.8-3.05%
invest in T-Bonds (10 year yielding 3.50%), and you get 0.5% risk free without investing your own money.
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... and if T-Bills go to 4% in the next 27 days - you "blowed up real good!" as SNL would say.
 
Quote from danoXP:

... and if T-Bills go to 4% in the next 27 days - you "blowed up real good!" as SNL would say.
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I dunno. It's a swap so it really doesn't matter what they trade at. Every 28 days you get to swap subprime slime at book value for new crisp T-Bill at market value. Zero risk... which is the whole point.
 
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