Monday, March 15, 2010

ALERT: Strong Uptick on Effective Funds Rate

The all important effective funds rate closed today at 0.21%.

This is up 3 basis points from Friday's close and just 4 basis points away from the upper limit on the Fed Funds target rate 0.25%.

What will the Fed do if 0.25% is pierced? Will they supply more reserves to a system with a trillion dollars  on the sidelines? Will they raise the IOER?

Special thanks to Michael Dunton of Mt. McKinley Bank who supplies me with the closing rates.

Mike notes the T-Bill rates are also climbing:

Treasury bill auction for Auction Date: 3/15/2010

4 weeks bills

0.110 today versus 0.080 last week

13 weeks bills

0.165 today versus 0.150 last week

26 weeks bills

0.240 today  0.205 last week
Something is brewing and I don't think there are many that realize it. Wow.
I would not be in the stock market, except for special situations and on the short side.

1 comment:

  1. The Fed will have no choice but to do whatever it takes to maintain the target rate, otherwise it loses all credibility (which should have already been lost as a result of the financial crisis!). This recent spike is potentially indicative of a problem brewing, although I still remember when on 10/25/07 the intraday high fed funds rate was 15%.

    The relevant data can be found here: