Interest Rate Roundup

Thursday, March 27, 2008

TSLF results

The results of the first Term Securities Lending Facility auction are in. The Fed sold/swapped $75 billion in securities. $86.1 billion in bids were submitted, meaning the auction had a 1.15 bid-to-cover ratio.

As a refresher, the TSLF allows institutions to swap AAA private mortgage-backed securities, agency collateralized mortgage obligations, and other paper for U.S. Treasuries. The Fed also expanded the program to allow primary dealers to offer Commercial Mortgage Backed Securities at the auction.

What do CMBS have to do with the residential mortgage market, ostensibly the market at the heart of this crisis and the one that the Fed is trying to save? Anyone? Anyone? Bueller? Certainly a few lobbying organizations are happy. But I just don't get it. Heck, I'm wondering when the Fed will accept every security and loan in the entire universe, right down to those bonds that gave holders the rights to David Bowie's royalties.


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