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Primary dealers borrow $37 billion from Fed
By Martin | March 28, 2008
Investment banks and broker dealers borrowed more than $30 billion a day from the Federal Reserve’s discount window this past week, but showed only tepid interest in a separate 28-day lending facility from the Fed that got under way on Thursday.
The 20 primary dealers borrowed $37 billion from the discount window on Wednesday, $8.2 billion more than the previous week. For the entire week, loans to the 20 primary dealers averaged $32.9 billion a day, up $19.5 billion from the previous week.
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The banks borrowed an additional $75 billion from the other Fed program established this month to boost liquidity in the markets. In a new program that lets the big firms swap illiquid mortgage-backed paper for highly sought-after Treasurys, the Fed offered $75 billion to the banks. But the banks submitted bids totaling just $86.1 billion, for a low bid-to-cover ratio of 1.15.
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The stop-out rate in the auction was 0.33%, just eight basis points higher than the minimum 0.25% set by the Fed, another indication that the dealers had little urgency to participate, Crescenzi said. “That is a very tight implied spread between Treasury general collateral and private-label residential mortgage-backed securities,” Crandall said.
Topics: market risk |
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