The Federal Reserve announced it would offer $150 billion in 28-day discount-rate loans via its term auction facility (TAF) today; the auction will settle on January 15.The minimum bid rate will be equivalent to the rate of interest that banks receive on excess reserve balances, which is currently 0.25%. This marks a change from the original arrangement, under which the minimum bid rate was determined by the average expected overnight federal funds rate over the term of the credit being auctioned.
The Fed created the TAF in December 2007 to provide short-term funds to banks affected by the lack of liquidity in funding markets. Under this program, the Fed auctions funds to banks against collateral that is accepted at the discount window.
Topics: Federal Reserve
More on Credit Derivatives
Arbitrageurs have exited trades, leaving basis structurally higher
Managed deals could be next, but market's potential is expected to be limited
Active deals seen as “the next step” after last year’s revival of static CDOs
Sign up for Risk.net email alerts
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.