Kitco News collects and features the top financial, economic and geopolitical news from around the world. Kitco's aggregated sources include some of the top newswires in the world including the Association Press, Canadian Press, Japanese Economic Newswire, and United Press International.
NEW YORK, Sept 5 - Almost half a year after Silicon Valley Bank went belly up and nearly set off a national banking crisis, still-growing borrowing from a Federal Reserve emergency lending facility gives the appearance of lingering trouble for the financial sector.
So far, there is no sense the increase signals a return to bank stress. Instead, borrowing via the program mostly represents longer-term loans taken out at its onset, likely by a limited number of institutions, coupled with some recent additional borrowing from banks who saw economic value in doing so.
Compared to other forms of Fed emergency lending, the terms of the loans are generous. The Fed said it would offer credit at 10 basis points over wherever the one-year overnight index swap rate stood at the time of the loan. The Fed also said it would take as collateral any securities it buys for monetary policy operations at face value, rather than at a discount.
EASY MONEY Market conditions may also explain why some banks have found some room to tap the BTFP even as overall conditions in their industry have returned to normal. That’s because they can get a favorable treatment for bonds that have lost value due to the surge in yields seen over recent weeks. The BTFP is scheduled to shut down next March and there's no sense the Fed is fixing to extend its life. And thus far, demand has also been a niche concern.
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