Fedwatch

Wed, Mar 12 2008, 09:44 GMT
by BBVA Bancomer Team

BBVA Bancomer


Bottom Line: Faced with the deterioration of the economic outlook, prompted by financial malaise, the Fed announces targeted injection of liquidity to aid markets in distress. These measures complement recently created channels deemed more effective than broad rate cuts. Market reaction was positive while the implied probability of a 75bp rate cut in the next FOMC declined to 64% from yesterday


Today, the Federal Reserve announced two measures to alleviate liquidity in funding markets.

  • • Term Securities Lending Facility (TSLF). One additional channel to promote liquidity with weekly auctions starting on March 27. The Fed will lend up to 200 billions dollars in Treasuries to primary dealers under better terms: the lending period is increased to 28 days from overnight and the Fed will accept non-agency AAA/Aaa-rated private-label residential MBS as collateral.
  •  • Currency swap lines with the European Central Bank (ECB) and the Swiss National Bank (SNB). Fed increased currency agreements for up to $30 billion and $6 billion to the ECB and the SNB, respectively. The terms of these swaps were extended trough September 30, 2008. These swap lines were opened last December with an initial provision of up to $20 billion and $4 billion to the ECB and the SNB respectively, and were to expire in June

These steps add to those taken on Friday, when the Fed increased the amount outstanding in the Term Auction Facility to $100 billion in March and assured the continuing operation of this channel as long as it is needed. Fed also initiated a series of term repurchase transactions that are expected to cumulate to $100 billion. These follow traditional guidelines for collateral purposes.

Published on  Wed, Mar 12 2008, 09:56 GMT

Archive

BBVA Bancomer  | Av. Universidad 1200 Col. Xoco México 03339 D.F.
http://www.bancomer.com/economica | e.economicos@bbva.bancomer.com

Legal disclaimer and risk disclosure

This document was prepared by Banco Bilbao Vizcaya Argentaria’s (BBVA) Research Department on behalf of itself and its affiliated companies (each a BBVA Group Company) for distribution in the United States and the rest of the world and is provided for information purposes only. The information, opinions, estimates and forecasts contained herein refer to that specific date and are subject to changes without notice due to market fluctuations. The information, opinions, estimates and forecasts contained in this document have been gathered or obtained from public sources believed to be correct by the Company concerning their accuracy, completeness, and/or correctness. This document is not an offer to sell or a solicitation to acquire or dispose of an interest in securities.

Interested in forex trading? forex brokerage firms!


Forex Capital Markets, LLC (FXCM)
Contact the broker/FDM
Open a demo account
MG Financial Group
Contact the broker/FDM
Open a demo account
Saxo Bank A/S
Contact the broker/FDM
Open a demo account		NordMarkets.com
Contact the broker/FDM
Open a demo account		Capital Market Services, L.L.C.
Contact the broker/FDM
Open a demo account

FXstreet.com will give you a 3 months membership as soon as minimum rebates have been generated (€150 for private trader/ €300 for corporate trader)

[Read Premium full description]


Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer.

Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management.

Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

©2008 "FXstreet.com. The Forex Market" All Rights Reserved.