![]() ![]() That so-called quantitative tightening is a complement to the rate hikes the Fed has delivered in its battle to curb inflation. So far it has managed to shed nearly $600 billion of bonds from a balance sheet that topped out above $9 trillion in the middle of last year. It also allows bonds now held by banks that have lost substantial value due to Fed interest rate hikes to go to the central bank at face value.ĭepending on how extensively the BTFP winds up being used, it could act as a counterweight to the nearly $100 billion in bonds the Fed is allowing to mature and not be replaced each month. Those bonds - collateral for Fed loans of up to a year in duration - will end up on the central bank's $8.4 trillion balance sheet.Īnalysts at Wrightson ICAP said in a research note this week that the new facility "could attract a substantial amount of interest from banks" because its pricing is attractive compared with other options. Treasury Department and Fed - the Bank Term Funding Program - aims to steady the financial system by swapping bonds owned by banks for the cash those institutions need to shore up their deposits and capital positions. central bank's efforts to winnow down its massive balance sheet.Ī key plank of the actions announced on Sunday by the U.S. bank collapses and the Federal Reserve's new lending program that was launched to prevent wider financial system fallout may have a knock-on effect on the U.S. ![]()
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