The Federal Reserve stepped up its efforts to reduce volatility in short-term lending markets, announcing Friday that it would inject up to $90 billion in two-week loans into the financial system starting next week.The new facility was revealed after the Federal Reserve Bank of New York offered overnight loans for a fourth consecutive day, helping to steady conditions in the U.S. repo market, where banks and investors make short-term loans in exchange for Treasurys and other high-quality collateral.The central bank said that it would expand its interventions beyond overnight loans after the lending rate for two-week funds rose sharply — an indication that investors were anticipating a fresh financing squeeze at the end of the quarter, when companies and traders settle their accounts. The new two-week loans will be offered in three operations: on Tuesday, Thursday and Friday.“The fact they are willing to telegraph this over quarter-end reduces the potential for funding … [Read more...] about Fed announces new effort to soothe money markets
Federated money market funds
(Reuters) – 1/REPO RUCKUS? The sudden stress in U.S. dollar funding markets in recent days has spooked people by stirring memories of the 2008 crisis. A rocketing repo rate — the key measure of liquidity in the global banking system — and a jump in the U.S. Federal Reserve’s target interest rate to levels not seen since 2008 forced the New York Fed to intervene four times to maintain the Fed funds rate in the 1.75%-2.0% range. It is unclear yet whether the tightness was a one-off, triggered by technical issues such as Treasury maturities and tax payments, or if there’s a systemic issue waiting to roil global markets. So far there’s no sign of spillover overseas but investors are on the watch for any warning signals, given the dollar’s dominance in cross-border trade and investment. For instance, cross currency euro-dollar swaps, effectively a reflection of dollar funding costs for offshore investors, are nowhere near levels seen even during … [Read more...] about Take Five: U.S. money market ruckus
NEW YORK, United States - For the first time in more than a decade, the US central bank this week stepped into financial markets to keep interest rates on short-term lending from popping above its target range. The New York Federal Reserve Bank conducted money market interventions on Tuesday and Wednesday and planned another for Thursday morning, as a cash crunch drove up the cost of borrowing for banks that need to replenish the reserves they hold at the central bank. What is the money market? Financial institutions use money markets to borrow for very short periods, from one day to a year, a crucial function to keep the gears of the economy running. In so-called repurchase or "repo" agreements, banks borrow by putting up assets like Treasury notes as collateral and then repay the loans with interest the following day. This lets them replenish the cash holdings they keep at the central bank whenever the amount falls below the required minimum set by the Fed. Money market interest … [Read more...] about Why is the NY Fed pumping billions into the money market?
Sections SEARCH Skip to content Skip to site index Business Subscribe Log In Log In Today’s Paper Business | After a Market Swoon, Investors Are Seeking Safety Supported by ByConrad De Aenlle Jan. 11, 2019 After rising for nine years in a so-so economy in the belief that prosperity was just around the corner, stocks swooned, even as growth picked up. That left many investors wondering whether the economy is turning another corner into a place where danger, maybe even a recession and a prolonged bear market, lurk. The S&P 500 dropped 13.5 percent during the fourth quarter, including dividends, giving the index a 4.4 percent loss for the year by that measure. It was the worst performance since 2008, despite strong corporate earnings and the best readings in several decades in unemployment and consumer confidence. As 2019 unfolds and the economic picture becomes clearer, it is possible that stocks will have … [Read more...] about After a Market Swoon, Investors Are Seeking Safety
Sections SEARCH Skip to content Skip to site index Business Subscribe Log In Log In Today’s Paper Business | In This Market, It May Be Time to Play Defense Supported by ByNorm Alster Jan. 11, 2019 After months of stock market declines, investment strategists are divided on appropriate responses. There is a range of possible approaches, none as simple as the kind of straightforward investing that can lead to immediate rewards when the market is consistently rising. Chris Brightman, chief investment officer at the investment advisory service Research Affiliates, for example, is currently unimpressed with most stocks. “We do advise our investors to hold lower allocations to global equities — particularly U.S. equities — than normal,” Mr. Brightman said. He urged broad diversification into such vehicles as Treasury Inflation Protected Securities, commodities and real estate investment … [Read more...] about In This Market, It May Be Time to Play Defense