CMediumErik on Nostr: The Fed's Bank Term Funding Program (BTFP) introduced after the March 2023 banking ...
The Fed's Bank Term Funding Program (BTFP) introduced after the March 2023 banking crisis now offers lower borrowing rates than the Fed pays in interest on reserve balances.
So, banks arbitrage this by borrowing from the facility (the Fed) at one interest rate, and then depositing that borrowed money with the Fed to earn a higher interest rate, and thus are earning that risk-free spread.
They're arbitraging the Fed and the jokes on us.
Published at
2023-12-23 20:57:18Event JSON
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"content": "The Fed's Bank Term Funding Program (BTFP) introduced after the March 2023 banking crisis now offers lower borrowing rates than the Fed pays in interest on reserve balances. \n\nSo, banks arbitrage this by borrowing from the facility (the Fed) at one interest rate, and then depositing that borrowed money with the Fed to earn a higher interest rate, and thus are earning that risk-free spread. \n\nThey're arbitraging the Fed and the jokes on us.\n\nhttps://image.nostr.build/3538d25f6b6b0416e280e0fefdff877c1c849e52650bc272ee7f8d4d08ca0431.jpg",
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