TAF not working but the TSLF is.
Today’s was bid for only $33.95 billion all accepted for $50 billion offered, at the minimum spread of 25 bp.
For the TSLF, success means low bidding or no bidding.
Related:
TSLF: Success
Results
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April 10th, 2008 at 9:21 pm
First Boston wrote this BEFORE the TSLF results.
TSLF could be very interesting today. Getting the sense that there may not be enough collateral to cover the auction. Remember the Fed only takes AAA private label MBS/CMBS not on creditwatch negative. That rules out a whole lot of securities. At the first schedule 2 auction there was 86.1B bid for a 75B auction. So 11.1B did not get funded and is probably still knocking around. Add to that a couple yards here and there additional that has come into each dealers hands, and you might get close to the 50B that is being offered today but certainly doesn’t seem like we’ll have a high-bid-to-cover. In theory dealers could bring schedule 1 collateral (Agy, Agy MBS) but it doesn’t make sense to pay the 25 bp minimum fee rate to fund stuff at Tsy GC +25 when it trades on top of Tsy GC in the market. We would look for an anemic bid-to-cover and a
stop-out close to the minimum. Stocks probably pop on this and drag Tsy prices lower as people take this as a sign funding pressures aren’t that bad, later the realization should set in that the Fed needs to expand the collateral it takes to make the TSLF more effective going forward. Finally, some talk out there of dealers packaging up things like lev loans into CLOs to take to the Fed (that would be for PDCF - get those #s at 4:30 today) TSLF doesn’t tkae CDO/CLO but it probably should be expanded to do so