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Rates Spark: It’s Jay’s day
Since the T-bills buying programme (re)commenced in mid-December, holdings of bills have risen to over US$425bn (from US$195bn). That has expanded the Fed's overall “securities” holdings (including bills) by some US$185bn. The Fed did this to help boost bank reserves, which had fallen to below US$3tn, coinciding with repo tightness, and in consequence saw the effective funds rate rise right up to just 1bp short of the rate paid on reserves. Since then, repo pressure has eased, and this week, the New York Fed announced a reduction in monthly T-bills buying from US$40bn to US$25bn. This is purely an operational ... (full story)