Fed’s TSLF Auction Fails to Draw $50 Billion in Bids (Update)
April 10, 2008 – 8:35 pm(CEP News) - The Federal Reserve received only $33.95 billion for a $50 billion auction through the term securities lending facility, officials announced Thursday.The absence of participants resulted in a bid-to-cover ratio of 0.68. This is much lower than the previous bid-to-cover ratios of 1.15 and 1.88 and could mean funding pressures have abated. The stop-out rate was 25 basis points - the minimum allowed rate.
“The bid-to-cover ratio is astonishingly low. You have to interpret it as positive but I’m still seeing trouble in other areas,” said Eric Lascelles, chief economist and fixed income strategist at TD Securities.
Some sources say that because the TSFL is still new, some firms are still not able to participate because of operational and accounting changes, but Lascelles said that’s unlikely.
“I have a hard time believing that if they need funding they aren’t participating. If they need it, they’re going to make it work one way or another,” he said.
