 | ||||
Tuesday, October 28, 2008
Federal Reserve credit freeze lending programs
The Federal Reserve has introduced two lending programs to help revitalize the credit markets:
1.Commercial Paper Funding Facility which is focused on supporting large
Commercial Paper Funding Facility which is focused on supporting large corporations
that have been unable to access traditional sources of commercial funding such as the commercial paper market. 2.Money Market Investment Funding Facility which is designed to support money-
Money Market Investment Funding Facility which is designed to support money- market funds. These funds are the largest participants in the commercial-paper market. The new Fed facility, once launced, will buy short term debt such as commercial
paper from money market funds and they in turn will use that cash to pay redemption requests from fund investors as they become due.The Commercial Paper Market
The commercial paper market is a key source fo short-term financing for U.S. companies.
As of October 2008, the commercial paper market was valued at approximately $1.45 trillion.
The U.S. Feeral Reserve launched a new Commercial Paper Funding Facility in October in which the Fed lends money to highly rated companies for up to three months. The facility is designed to be a source of financing in emergencies.
The Fed interest rates under this program are set daily. They are higher than the rates that were available in the commercial-paper market prior to the credit freeze.
The rate first charged by the Fed for access to the Commercial Paper Funding Facility was 2.88% including a surcharge and 3.88% for asset-backed commercial paper.
The Federal Reserve reports that at least 24 corporations have signed up to sell loans into the program including:
Amercian Express-Three month loan facility
-Three month loan facilityGeneral Electric -Three month loan facility
-Three month loan facilityInterest Rate Monitor
Federal Three-Month30-day FundsTreasury Three-MonthCommercialRate (% Daily) Yield (%) LIBOR (%) Paper (%)2006 (Full year)
2007 (Full year)
2008 (Month end)
January4.32 2.75
4.32 2.75February 3.01 2.12
3.01 2.12March 2.51 1.26
2.51 1.26April 2.37 1.29
2.37 1.29May 1.98 1.73
1.98 1.73June 2.74 1.86
2.74 1.86July 2.03 1.63
2.03 1.63August 1.94 1.72
1.94 1.72September 2.03
2.03 October0.95 0.772 3.5075 2.75
0.95 0.772 3.5075 2.75November
December
Year to date (2008)
AviationRegister E-Xpert Witness Journal
| ||||
Comments are subject to the site's terms of use and do not necessarily reflect the opinion or approval of the publisher, editorial staff or employees. Readers whose comments violate the terms of use may have their comments removed or all of their content blocked from viewing by other users without notification.
| ||||
Government spending & interest rates: U.S. government revenues for 2010 will reach $2.074 Tn, spending will hit $3.653 Tn & the budget deficit will decline to 11.2% of GDP
Interest rates: Funding a smaller U.S. budget deficit will require the sale of fewer treasury bonds, hold down long-term interest rates and boost economic recovery.
Interest rates & budget deficit: The U.S. government has vowed to halve the budget deficit within its for year term boosting hopes for sustained lower interest rates.
