Another big time trade off/Some company comments/Japan
Flying under the radar of the discussion on when/how much will the Fed cut rates this year and what is the fate of QT, we've heard over the past few days from two Fed members that the Bank Term Funding Program is going to be retired on schedule on March 11th. Speaking at an event yesterday Fed Vice Chair for Supervision Michael Barr said the BTFP "worked as intended" and that it "really was established as an emergency program," implying that the emergency is over and thus this program should be as well.
Michelle Bowman in her speech Monday said, after talking about the creation of the BTFP in the wake of the major bank failures, "It is important to note that the Bank Term Funding Program is scheduled to expire in mid March of this year."
I'll add this to my January 2nd list of big trade offs. It is good news that an emergency liquidity program is ending but on the other hand, a crutch for many banks is going away. One that totaled $141b in the week ended 1/3/24, a fresh high.
To recall, according to the Fed, "The BTFP offers loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging any collateral eligible for purchase by the Federal Reserve Banks in open market operations (see 12 CFR 201.108(b)), such as U.S. Treasuries, U.S. agency securities, and U.S. agency mortgage-backed securities. These assets will be valued at par. The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution’s need to quickly sell those securities in times of stress."