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Latest Fed Auction Show Falling Rates

The latest Fed auction illustrates a continued downward interest rate trend

Here are the results from the prior auction:

On February 11, 2008, the Federal Reserve conducted an auction of $30 billion in 28-day credit through its Term Auction Facility. Following are the results of the auction:

Stop-out rate: 3.010 percent

Total propositions submitted: $58.400 billion
Total propositions accepted: $30.000 billion
Bid/cover ratio: 1.95

Number of bidders: 66

Banks like Wachovia (WB), Citigrpoup (C), Bank of America (BAC) and Wells Fargo (WFC) are now getting money from the Fed and at almost 1/2 the 30 yr interest rates on the mortgages they can make with it. While they may be taking write-downs on the CDO portfolios they hold, when they report earnings for the current quarter, I have a feeling that people are going to be surprised by the results from normal operations.

The recent plunge in interest rates has not seem a corresponding drop in load rates from the bank. Simply put, this activity essentially allows banks to virtually print money.

Disclosure (“none” means no position): Long Citigroup and Wachovia, None

Todd Sullivan's- ValuePlays

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