[ForexNews]

New York Fed President Dudley provided an update today on the Term Asset-Backed Securities Loan Facility (TALF), which he argues has been working as designed. First among his points is that the rate of ABS issuance has picked up, with 13 deals worth $16.4bn in the latest week. Second, only about half of the recent issuance has relied on TALF funding, which suggests the TALF is "helping to restart the market, rather than the TALF being the market." Third, spreads on consumer ABS have narrowed considerably. Dudley also said that the Fed is considering expanding the TALF to include legacy RMBS in an effort to make it even more effective. He also identifies challenges with the program, most notably the desire to increase participation of real money investors, such as mutual funds, pension funds, and insurance companies, which are not permitted to use leverage. The Fed is therefore working to enable the creation of vehicles to make it easier for a broader range of investors to have access to TALF funding.

Cleveland Fed President Pianalto also spoke this morning on the economic outlook. She argued that the steep drop in the economy has begun to moderate and expects a gradual recovery to begin in the second half of the year. She cites long-standing imbalances as reasons for a feeble recovery: 1) rebuilding of personal wealth, which means greater savings; 2) correcting our massive trade deficit; and 3) correcting the fiscal imbalance.

Fed Chairman Bernanke delivered welcoming remarks at a Fed conference on financial markets and monetary policy, but did not address the economic outlook.