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ECB FILLED ALL BIDS IN 12-MONTH AUCTION AT 1% BENCHMARK RATE

Posted by WARREN MOSLER on June 24th, 2009


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Now that the ECB has demonstrated how it can set term bank rates out to a year (and minimize the need for the interbank markets) the door is open to same for any maturity.

And it also paves the way for other CB’s to do the same as they inch closer to my long standing proposals.

Again, for CB’s it’s about price (interest rates), not quantity (size of operation, CB’s balance sheet, etc).

The effects on the economy are those of the resulting interest rates, and not the quantities involved in the CB’s operations.


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2 Responses to “ECB FILLED ALL BIDS IN 12-MONTH AUCTION AT 1% BENCHMARK RATE”

  1. knapp Says:

    Would such a policy eventually kill demand for long term Treasuries since investors could just buy the one year T-bill and roll it over at maturity and since there would be little prospect for capital gain on duration.

    Reply

  2. warren mosler Says:

    should help it some as at least the first year is guaranteed to earn more than the short term rate. it’s a free year of positive carry

    Reply

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