Federal Reserve: Announces its bank term funding program will cease making new loans as scheduled on March 11 Adjusts interest rate on new BTFP loans to be no lower than interest rate on reserve balances on day loan was made New rate on BTFP loans effectively increases rate by nearly 50 bps; change is effective immediately Says change to BTFP rate ensures the program continues to support its goals in current rate environment The TL/DR on this is that the BTFP program had been open to arbitrage abuse, involving borrowing at a lower rate using high-quality collateral and potentially investing or lending that capital at a higher rate. https://www.forexlive.com/centralba...ts-interest-rate-on-emergency-loans-20240125/
The message is: no easy money anymore for banks & their hedge fund clients. Both were playing games with spot/futures arbitrage leveraged to the hilt. It was about time for the FED to stop this mockery.
Or the message is that rate cuts are happening to lift their balance sheets so this is no longer needed.
%% Good read; + they noted the purpose + why its no longer needed. I thought that was bit strange when they first included hedge funds; but i'm no central banker/ so no worries on that. AIG found out the hard way, some bank or insurance co rescue may not be so fun; but they finally settled the complex court cases on that.