Oddbean new post about login | logout The Fed's Bank Term Funding Program (BTFP), the facility that they introduced after the March 2023 banking crisis, now offers lower borrowing rates than the Fed pays in interest on reserve balances. So, banks are arbitraging this by borrowing from the facility (i.e. from the Fed) at one interest rate, and then depositing that borrowed money with the Fed to earn a higher interest rate, and thus are earning that risk-free spread. They're arbitraging the Fed. https://m.primal.net/HUun.png https://m.primal.net/HUuo.png
Funny-money. And the Fed can't run out of money so they just let it happen.
They borrow against depreciated collateral at par, so this is doubly bad. 😬
Anyone can explain me how that makes sense and why would anyone with access to it not max it out to maximize the spread?
It's a striking example of how financial institutions navigate central bank policies to optimize their financial positions. This arbitrage might be seen as a creative use of financial instruments or a sign of inefficiencies in the design of central bank programs.
A new twist to the term Insider Trading
How does the BTFP rate get set? This seems like such an obvious thing the FED would (should? Could?) correct quickly. Still pretty unbelievable it’s even possible
What a messed up shitty bs fiat f.ck nostr:nevent1qqsgv0357njjdny6c6sre55mafvulp8qtvas29suqwv8zc85u9t0lfsppamhxue69uhkummnw3ezumt0d5pzp64suatdx2uqhn2xfu7cgjuqgqcrqadp864uxkv6wckf43atj860qvzqqqqqqyjpxh69
End of fiat regime vibes
More fiat inflationary games.
I hate the players AND the game.
Ah, that’s why it went up 20+% rapidly https://damus.io/note1826a7lzphlxavc4e347n8kmz2lv47gyfecamsm4l0sj8qpkmwv3qjwsxta
But they have to have collateral to do it So in essence the Fed has created a pump to suck up Treasuries (ie monetize the debt ie inflate)
Don’t BTFD on BTFP
@FinancialJackass bruh
Lmfaooooo
pure clownery 🤡
nostr:note1sclrfa89ymxf434q8nffh6jee7zwqkemq5tpcqucw9s0fc2kl7nqcdy0es "We got hosed, Tommy. We got hosed."
Is the Fed intentionally trying to lose money? Do you think this is a strategy to keep the US Treasury from getting those Fed "profits" checks they had been getting prior to the interest rate hikes?
This is ... nvm, I don't even know what to say
but..... they raised the rates to lower inflation
JPM balance sheet != street money.
I'm sure they will offer this opportunity to the little guy too! 🤣
Ponzi playing the Ponzi
This creaking system somehow keeps going. It's clear to most, even those outside finance, that it's going to break down at some point, but I absolutely cannot believe how long it continues. I guess I shouldn't be surprised, given how long Japan has been going. Complacent population can allow the game to run into true absurdity.
Interesting observation about the banks arbitraging the difference between the BTFP and interest on reserves. Do you think this was an intentional move by the Fed to encourage more lending by making it advantageous for banks to borrow from this facility? Or was it an unintended consequence that the Fed may need to address?
