Fed's new backstop program could inject up to $2 trillion in liquidity into the system
Per Bloomberg
The Federal Reserve has made it known that they plan to step in, and according to JPMorgan Chase analysts, this could mean that $2 trillion in liquidity would be introduced into the system. This was reportedly the maximum estimate.
Analysts reportedly looked at the banks with the highest uninsured-to-insured deposits ratio, picking out six. After that, they estimated that there would be a $460 billion total in uninsured deposits across those banks.
Strategists that were led by Nikolaos Panigirtzoglou in London said to clients that they estimate that the Bank Term Funding Program's usage is estimated to be big. This program had a maximum usage of $2 trillion, a number close to the total "bonds held by US banks outside the five biggest."
The program was set up earlier in March as Treasury two-year yields have dropped by 60 basis points this week. So far, the US banking system still has $3 trillion in reserves, per JPMorgan strategists.
Wrightson ICAP's Lou Crandall gave a statement on the situation, sharing that they guess that the program will be good for multiple institutions, even for those that weren't facing questions regarding their liquidity.
Crandall: “We expect the advantageous financial terms of the new program to overcome stigma concerns at many institutions in the weeks ahead. However, the speed and magnitude of the run-up in Fed lending is highly uncertain.”
The Federal Reserve has announced that it will launch FedNow, a service allowing banks to transfer payments instantly across the financial system, in July. The initial announcement of FedNow was in 2019.
Recently, Biden assured the public saying that the banking system was safe and that the deposits of Americans were safe. He then noted that he would hold "those responsible for the mess fully accountable."
See flow at unusualwhales.com/flow.
Other News:
- The Federal Reserve has announced it will launch the service FedNow in July, which will allow banks to instantly transfer payments across the financial system
- Biden has said: Americans can rest assured that our banking system is safe. Your deposits are safe
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