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If they were unwanted, the 30 day interest rate would spike, but it hasn't. This is purely a move to provide liquidity, which is the essential job of the Fed.
by QuesnayJr 7y ago
If they were unwanted, the 30 day interest rate would spike, but it hasn't. This is purely a move to provide liquidity, which is the essential job of the Fed.
- SilasX 7y agoThey only not unwanted because the Fed is providing demand the market isn’t. That would be just as true of anything else where a glut hit the market.
- QuesnayJr 7y agoWhat's the story here? Banks are buying 30-day bonds so they can borrow overnight with the Fed? They can only borrow up to the amount of the bond, so why don't they just... use the money directly rather than in this roundabout fashion. If the Fed wants to keep the 30-day interest rate down, they can just buy the bonds directly themselves. They don't need to wait for the banks to buy the bonds and then repo them.
- ivalm 7y agoThey are buying treasury and selling a treasury future, which nets them some premium. They then fulfill overnight capitalization requirements with the very same treasuries. Future premiums are higher than overnight lending rate.