TSLF Collateral Expanded to ABS
The last TSLF auctions have seen weak demand.
The Federal Open Market Committee authorized an expansion of the collateral that can be pledged in the Federal Reserve’s Schedule 2 Term Securities Lending Facility (TSLF) auctions. Primary dealers may now pledge AAA/Aaa-rated asset-backed securities, in addition to already eligible residential- and commercial-mortgage-backed securities and agency collateralized mortgage obligations, beginning with the Schedule 2 TSLF auction to be announced on May 7, 2008, and to settle on May 9, 2008. The wider pool of collateral should promote improved financing conditions in a broader range of financial markets.
May 2nd, 2008 at 8:51 am
ideally they lend at a penalty rate a la Bagehote’s advice. http://en.wikipedia.org/wiki/Walter_Bagehot
May 2nd, 2008 at 4:00 pm
God forbid the downgrades continue.
May 2nd, 2008 at 4:03 pm
Good point. The SLS is a smart tool. Liquidity relief, but discriminative pricing and absence of stigma…by th way the last joke on that count: “do you know why the Fed has the TSLF, the BoE the SLS, and the ECB nothing ?….because they already have all the junk …”. Fair.