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(Updates with analyst reaction)
WASHINGTON (Thomson Financial) - The US Federal Reserve will raise the total size of its March TAF auctions to 100 bln usd and begin 28-day term repurchase agreements that are expected to total 100 bln usd to 'address heightened liquidity pressures in term funding markets'.
TAFs are Term Auction Facilities that allow banks to access funds at interest rates that are lower than those offered at the discount window. 'To provide increased certainty to market participants', the Fed said it will conduct the TAF auctions for at least the next six months 'unless evolving market conditions clearly indicate that such auctions are no longer necessary.'
'It sounds like the lender of last resort has just opened up a new resort,' is how Robert Brusca of FAO Economics characterized the move. He said it indicated the Fed is seeing bigger funding problems with larger financial institutions.
The 100 bln usd of term repurchase agreements (repos) will accept any type of securities -- Treasury and agency debt, mortgage-backed securities -- that are accepted in standard Fed open market operations.
Both the TAF auctions and the term repos could be increased in size 'if conditions warrant', the Fed statement said.
These moves provide some relief for big banks and other institutions, Brusca said, but 'it doesn't get them to lend to each other or to the public,' and that lack of lending is what still poses a credit threat to the economy.
The US central bank also said it 'is in close consultation with foreign central bank counterparts concerning liquidity conditions in markets'.
dennis.moore@thomson.com
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发表于 2008-3-7 10:05 AM
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