Success.
$75bn offered, $59,460bn submitted and accepted at the minimum rate of 25 bp.
This was a roll from the march 26 th auction where:
$75bn were offered, $86,100 submitted and $75bn accepted at 33 bp.
Going back to normal slowly…
NB: for this type auction low bidding is good.
Ainsi donc la loi sur les nouveaux devoirs des chômeurs a été adoptée. Désormais, les allocations chômage seront dégressives en cas de refus de deux offres "raisonnables". Mais à quoi cela peut-il bien servir?
This CDS report was written by Markit's Gavan Nolan Investment grade European credit was resilient today in the face of declining stock markets. The strong performance in financials continued, with yet another bank providing a positive surprise. Credit Suisse posted ...
Unfortunately, there will be a brief delay in service while I dry off my undergarments and descend into the plateaued euphoria of the newly minted Icahn Report.
It’s a cliché that people adapt. This new paper shed interesting light upon this. It finds that people do indeed fully adapt to both marriage and the birth of a child. They get happier as these events draw nearer, but...
A noted manager of financial sector funds finds little to like out there. (WSJ.com) Goldman Sachs (GS) raises $10 billion to invest in loans backing LBOs. (FT Alphaville also Deal Journal) The Mexican Peso is at a ...
freeze a Yankee.” That’s what bumper stickers said in the 1970s. But now, the upper hand is on the other foot. No Tags
Just in time to avoid the aftermath of the dreadful Merrill results, I'm off on holiday. (Although it's worth noting that the shares "sinking" 9% in after-hours trade only brings them back to where they closed yesterday.) There won't be ...
contact
jck [at]
aleablog [dot] com
© 2008 Alea | Powered by Wordpress
April 25th, 2008 at 8:06 am
The argument is the TSLF collateral rules are too strict which accounts for the low bid-to-cover. Not that things are getting better.
These results of this week’s TAF back this up as the banks paid more (2.87%) for money than they would have at the discount window (2.50%)
Thoughts?
April 25th, 2008 at 10:12 am
TAF and TSLF aren’t comparable. TAF is collateral for funds and TSLF is collateral for collateral.
TAF isn’t working but it raises a question: why are banks using the TAF when the discount window would be much cheaper ? [ I don't know, stigma maybe, so the 27 bp is the price of avoiding stigma ;-)]
For the TSLF, I don’t buy the argument that collateral rules are too strict, there was a wide spread between treasuries general collateral and the other type of acceptable “good” collateral, and the Fed succeeded in narrowing it and tha’s their job, the relationship between treasuries and AAA should be pretty stable, if not you have a systemic problem.
April 25th, 2008 at 9:57 pm
TAF & TSLF are two paths to the same end. One provides good collateral to swap for cash and the other provides cash? How are these different? One provides cahs to banks that can;t get financed and the other procvides collateral to b/d so they can pretend to trade good assets with one and other.
Somehow I suspect if the implict government gar. were pulled tomorrow, a few broker dealers would be 50% lower on the way to the graveyard.
Perhaps that is why the BOE was honest enough to term out 1 yerar with extension for 3.
April 26th, 2008 at 5:47 pm
Sorry for changing the subject here. I wanted to pose a question related to the monoline issues you posted a couple days ago. A buddy of mine claims that, because of the CDS market, monoline insurance is an outdated business model that will go the way of video rental stores. Any truth to this?
Thanks
April 26th, 2008 at 7:57 pm
Regarding the TSLF collateral requirements, I posted this on April 10
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
April 27th, 2008 at 8:54 am
Markit:
I think the TSLF has a different objective than the TAF, basically the spread between treasuries and other “good” collateral was at aberrant level indicating systemic stress and that’s the issue the Fed wanted to address and it did so successfully so far. As for the ad hoc packinging of lev loans etc this is more a bank problem than a primary dealer problem with some exceptions like LEH maybe. I don’t think the TSLF should be expanded but the TAF should have longer term funding and be done insuch size as the rate converge with the discount rate.
April 27th, 2008 at 8:56 am
julio_lego:
the monolines are dead because there is minimal new business for them, they are de facto in run-off mode.
April 27th, 2008 at 3:35 pm
jck, thanks, that is understood. but assuming if they can fix their balance sheets, why would anyone use them if when defaults can be hedged with CDS?
April 27th, 2008 at 5:04 pm
julio_lego:
in the past, the monolines had a comparative advantage because of their triple A rating. they could write so-called “insured” CDS without putting up collateral or being subject to margin call so they could do it cheaper than anyone else, this is no longer the case.
April 27th, 2008 at 8:03 pm
thanks. thanks. good explanation. so it appears that if they can get back an AAA rating and write new business, they have a fighting chance, otherwise, they are minced meat.
April 29th, 2008 at 12:27 pm
julio:
Main-street investors buy a huge chunk of muni issues . Does your dentist know how to use CDS to hedge against default, or even how to do basic credit analysis?