Last modified: 2008-06-29 01:15:48 by genesis

Last modified: 2008-02-12 10:28:02 by stormsailor1981
Reason: sp

Last modified: 2008-02-12 13:00:58 by ukvipersden

Quote:

Ben has no choice.

He is not about to take The Fed down.

Quote:

In fact, The Fed is actually taking down risk, as I have said repeatedly, and de-leveraging not only their own balance sheets but they are also forcibly taking down risk in the primary dealers - whether they like it or not!

Last modified: 2008-02-12 16:37:06 by mtgspy

Quote:

The Desk selects from propositions across the three tranches according to the attractiveness of bids, measured relative to current rates in the financing market for each particular class of collateral. Benchmark rates for this purpose are based on an internal daily survey of financing rates paid by the primary dealers. Overall, in recent years the distribution by collateral tranche of outstanding RPs has been weighted heavily toward the Treasury tranche (Chart 13). This pattern continued to hold in 2007, until financial market strains appeared in short-term funding markets. At that point dealers’ propositions against agency and MBS collateral tranches that it accepts on its RPs became more attractive on a relative basis.

In August, the Desk arranged three RPs with a single tranche—the third category under which agency MBS securities along with the other collateral types are eligible. In order to reduce operational complexity, this step was taken during a period of extreme market volatility and at a time when market quotes with which to benchmark propositions for different collateral tranches were not available. Despite the desire to reduce operational complexity, the choice to use a single-tranche in these operations, at a time when there was considerable market focus on non-agency mortgage-backed securities elicited some confusion about exactly what types of collateral were eligible.

Quote:

Beginning in August 2007, the Desk’s general operating procedures were less effective than they had been in recent years in maintaining the fed funds rate around its target, reflecting market developments that exerted upward rate pressures that emerged in the overnight market and the Desk’s response to these pressures. In the first maintenance period in which these pressures appeared, the period ending August 15, the Desk effectively suspended its normal approach to controlling the funds rate. In order to combat severe and persistent upward rate pressures that were threatening to become even more deeply embedded in market expectations, the Desk provided a level of excess reserves significantly above any amount banks would have chosen to hold at rates anywhere around the target. This extraordinary measure was taken in order to restore a more normal balance between risks of upward and downward rate pressures. In subsequent maintenance periods, the Desk returned to a more normal approach for providing period average levels of reserves.

Last modified: 2008-02-12 18:43:30 by 3600
Reason: spelling errors