The two-year finished up 3/64, and the ten-year was lower by 7/64. The benchmark curve steepened by 4 basis points, and currently sits at +235.5 bps. A basis point represents .01%.There were no Fed purchases or Treasury auctions today. The Fed will buy Treasury notes tomorrow and Thursday.
TALF
The $1 trillion Term Asset-Backed Securities Loan Facility was created by the Fed to aid the flow of credit to consumers by providing liquidity for securities backed by loans for credit cards, equipment dealer floor plans and small businesses. It was expanded May 1st to include newly issued Commercial Mortgage Backed Securities (CMBS) and previously eligible TALF loans maturing in 5 years, (the previous limit was 3).
The program was expanded again today to include already issued AAA rated CMBS to spur more participation in the program. The first TALF auction on May 2nd took in $10.5 billion in securities and the auction scheduled for June 2nd doesn’t look like it will be much bigger.
Today’s announcement greatly expands the universe for TALF eligible securities. According to Bloomberg, only $35 billion in TALF bonds have been created this year. In comparison, $12.2 billion in CMBS were created last year, down from the record $237 billion sold in 2007, and although many of them aren’t rated AAA, this gives many more opportunities for firms to participate. Whether it makes sense for the Fed to take all this extra risk onto their balance sheet is another story.
Have a great evening.
Cliff J. Reynolds Jr., Junior Analyst
TALF
The $1 trillion Term Asset-Backed Securities Loan Facility was created by the Fed to aid the flow of credit to consumers by providing liquidity for securities backed by loans for credit cards, equipment dealer floor plans and small businesses. It was expanded May 1st to include newly issued Commercial Mortgage Backed Securities (CMBS) and previously eligible TALF loans maturing in 5 years, (the previous limit was 3).
The program was expanded again today to include already issued AAA rated CMBS to spur more participation in the program. The first TALF auction on May 2nd took in $10.5 billion in securities and the auction scheduled for June 2nd doesn’t look like it will be much bigger.
Today’s announcement greatly expands the universe for TALF eligible securities. According to Bloomberg, only $35 billion in TALF bonds have been created this year. In comparison, $12.2 billion in CMBS were created last year, down from the record $237 billion sold in 2007, and although many of them aren’t rated AAA, this gives many more opportunities for firms to participate. Whether it makes sense for the Fed to take all this extra risk onto their balance sheet is another story.
Have a great evening.
Cliff J. Reynolds Jr., Junior Analyst
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