- Rates markets swung back and forth on prospects for the Treasury’s Troubled Asset Relief Plan (TARP) working its way through Congress. Financial stress remains high. Money market mutual fund withdrawals drove Treasury bills to record low yields earlier this week but yields have begun to normalize as withdrawals stabilize and the Treasury provides more supply through its supplementary financing operations. Bill yields are likely to continue to normalize, especially once we make it through quarter-end next week.
- The Fed has vastly expanded its balance sheet over the past two weeks, adding $5.6bn of agency discount notes, $15.8bn of discount window loans, $105.7bn of loans through the primary dealer credit facility, a $44.6bn loan to a troubled insurance company and $72.7bn
of asset backed commercial paper as of Wednesday. The Federal funds rate has traded below the Fed’s target for much of this week but was not as low as one would expect with the expansion of Fed lending because troubled assets continue to clog bank balance sheets. The passing of quarter end should help clear the logjam but is unlikely to solve the problem.
Fixed Income Strategy - September 26 2008
September 26th, 2008 · No Comments
Tags: Fixed Income Strategy
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