Fed auction reveals relative interbank calm

Money market tensions in the United States showed further signs of abating on Tuesday as the Federal Reserve published the results of its latest Term Auction Facility operation.
Money market tensions in the United States showed further signs of abating on Tuesday as the Federal Reserve published the results of its latest Term Auction Facility operation.

The results of the operation conducted on Monday, which added $30 billion in 28 day loans, revealed a drop in demand for and the cost of central bank money.

The operation was oversubscribed with a bid-to-cover ratio of 1.25%, down from the auction conducted a fortnight ago, which was oversubscribed almost twice over. Last month's auctions were oversubscribed by a ratio of 3.08 and 2.88.

As was the case a fortnight ago, the stop-out rate, which cites the lowest interest charge at which bids are accepeted, was way below the federal funds rate at 3.12%. The federal funds rate is now 3.5%. In December, the stop out rates were 4.65% and 4.67%, 40 and 42 basis points above the federal funds rate, which was then 4.25%.

The number of banks bidding for funds also fell slightly from 56 to 52.

Interbank rates have eased substantially since five of the most powerful central banks', including the Fed and the Bank of England, announced that they would inject extra funds in a bid to lower banks' borrowing costs. The passing of the year-end, when money market tensions are traditionally high, has also helped narrow interbank spreads.

To read the results of the Term Auction Facility operation, click here

To read the results of the previous Term Auction Facility operation, click here

To read the results of the 20 December Term Auction Facility operation, click here

To read the results of the 17 December Term Auction Facility operation, click here

  • LinkedIn  
  • Save this article
  • Print this page  

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.centralbanking.com/subscribe

You are currently unable to copy this content. Please contact [email protected] to find out more.

You need to sign in to use this feature. If you don’t have a Central Banking account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: