Gustavo Philippsen Fuhr on LinkedIn: Central Banks - Cost of Capital - U.S. Fed raises rate on emergency loan…
Central Banks - Cost of Capital - U.S. Fed raises rate on emergency loan program to stop arbitrage. Bank Term Funding Program will expire on March 11 as…
LinkedInGustavo Philippsen Fuhr

"Central Banks - Cost of Capital - U.S.

Fed raises rate on emergency loan program to stop arbitrage.

Bank Term Funding Program will expire on March 11 as planned.

Banks will see higher rates to borrow effective immediately.

Federal Reserve ends bank funding lifeline in March after Silicon Valley Bank collapse.

BTFP loan rate was 4.93% on Tuesday, while reserve balances currently reap 5.40%.

For banks, the drop in BTFP borrowing costs had spelled a larger arbitrage opportunity, one where institutions could borrow from the facility before parking the proceeds in their accounts at Fed
to earn interest on reserve balances.

The change eliminates that opportunity."

Source: Bloomberg