Daily traded volume for US Treasuries is about $500bn.
If there are $100bn of withdrawals tomorrow and banks have to liquidate bonds to provide liquidity for those, then that’s gonna crater T-Bills and push interest rates higher.
So the Fed has stepped in and offered a route for banks to get cash without selling their UST.
Lots of money will move tomorrow, some banks will struggle, but UST should be solid and interest rates and money markets should be insulated.
I understand the solution but I think it weird manipulation of markets by government has appearantly been so normalized. And I would understand you don't see this is manipulation because it a 'loan' but it isn't healthy either.
Yes. Regulated markets are by definition "manipulated" by regulators. The sky is also blue.
It’s always been this way.
This is a $25bn program. It’s small in the scheme of Open Market Operations.
QE ran for 5 years and was $85bn per month.
Also QE was asset purchases and not loans. Meaning QE liquidity injections stayed in the system indefinitely, whereas BTFP will be repaid and drained from the system within a year.
