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Archive for April 30th, 2010

Chatter About the Fed/ECB CCY Swap Line

Posted by WARREN MOSLER on 30th April 2010

This one’s for the bloggers-

Dollar swap lines are functionally unsecured loans to foreign govts. that the Fed can do unilaterally. Congress only finds out well after the fact. Last time around they did $600 billion, including lending (unsecured) to nations Congress never would have approved.

The problem is the Fed Chairman insists they are secured because we get local currency deposits at the foreign central bank as collateral.

That’s like putting up your watch as collateral for a loan but you still wear it.

Chatter About the Fed/ECB CCY Swap Line
If reinstituted, it is a basic spot/forward FX trading line.

What this does is to give the ECB the power to lend USD in Europe. It
has 2 potential benefits:

1.Not all banks in Europe who require USD funding has access to the Fed
or the FF market

2.They don’t have to wait until NY opens if panic breaks out in Europe
over USD funding.

There is a third benefit. Politics. It let’s the market know that the
central banks are on the case, and the Fed doesn’t want to see the
FRA-OIS spread spin out of control.

Posted in CBs, ECB | 5 Comments »

what is gong on with swap spreads this am?

Posted by WARREN MOSLER on 30th April 2010

Fed also re opening swap lines to ECB – looks ready to do more unsecured dollar lending to them and maybe others.

They look to be doing what they did last time around to keep libor down – lend unsecured to bad credits. High risk but it does get rates down.

On Fri, Apr 30, 2010 at 12:23 PM, Jason wrote:

Confluence of events..

Month end bid for treasuries
Goldman stock down 14 and financial CDS wider creating some fears for financial sector
Greece flight to quality concerns going into the weekend

Fed to begin expanding the Term deposit facility which will remove excess cash and remove downward pressure on term LIBOR

LIBOR quoted for Monday as 35.375 / 35.5 +1

1y OIS-LIBOR 5 day chart:


2y spreads leading the way wider +5 to 23.5

Still cheap though

Press Release
Release Date: April 30, 2010

For immediate release
The Federal Reserve Board has approved amendments to Regulation D (Reserve Requirements of Depository Institutions) authorizing the Reserve Banks to offer term deposits to institutions that are eligible to receive earnings on their balances at Reserve Banks. These amendments incorporate public comments on the proposed amendments to Regulation D that were announced on December 28, 2009.

Term deposits, which are deposits with specified maturity dates that are held by eligible institutions at Reserve Banks, will be offered through a Term Deposit Facility (TDF). Term deposits will be one of several tools that the Federal Reserve could employ to drain reserves when policymakers judge that it is appropriate to begin moving to a less accommodative stance of monetary policy. The development of the TDF is a matter of prudent planning and has no implication for the near-term conduct of monetary policy.

The amendments approved by the Board are a necessary step in the implementation of the TDF. As noted in the attached Federal Register notice, the Federal Reserve anticipates that it will conduct small-value offerings of term deposits under the TDF in coming months to ensure the effective operation of the TDF and to help eligible institutions to become familiar with the term-deposit program. More detailed information about the structure and operation of the TDF, including information on the steps necessary for eligible institutions to participate in the program, will be provided later.

The amendments will be effective 30 days after publication in the Federal Register, which is expected shortly.

Posted in CBs, ECB, EU, Fed, Interest Rates | 1 Comment »

OPEC April Crude Output Up 25,000 Bbl/Day to 29.19 Mln

Posted by WARREN MOSLER on 30th April 2010

No sign the price hikes are coming from demand pressures.

It’s just the saudis hiking price, thinly masked by the news headlines and passive commodity buyers they use for ‘cover’ so no fingers get pointed in their direction

— Original Sender: NLRT ALERT, BLOOMBERG/ 731 LEXIN —

—– Original Message —–
At: 4/30 2:21:45

OPEC April Crude Output Up 25,000 Bbl/Day to 29.19 Mln

The attached story matches the criteria for the News Alert named “OPCR”. Type {97 } to view the story on wire BN (BLOOMBERG News).

Your keyword(s) were found in the story’s headline.
OPEC April CRUDE OUTPUT Up 25,000 Bbl/Day to 29.19 Mln

Posted in Comodities | No Comments »

It’s not too late for Greece

Posted by WARREN MOSLER on 30th April 2010

It remains my contention that Greece can dramatically upgrade its new securities simply by putting a provision in the default section that states that in the case of default the bearer, on demand, can use the securities at maturity value plus accrued interest to pay Greek government taxes. This makes the debt ‘money good’ for as long as there is a Greek government that levies taxes.

This would allow Greece to fund itself a low interest rates. It would also be an example for the rest of the euro zone and thereby ease the funding pressures on the entire region.

However, it would also introduce a new ‘moral hazard’ issue as this newly found funding freedom, if abused, could be highly inflationary and further weaken the euro.

Spread the word!

Posted in ECB, EU, Government Spending | 12 Comments »

Tea Party Protest Sign

Posted by WARREN MOSLER on 30th April 2010

Posted in Exports, Government Spending | 63 Comments »