Fed Reports Light Demand for Treasury Loans
Demand for U.S. Treasuries significantly dropped off from last week in a
Federal Reserve
Bank of New York auction Thursday, suggesting the strains that have persisted in the liquidity market may be easing.
Primary dealers on Thursday bid just under $34 billion for the $50 billion in Treasuries available as 28-day loans through the Fed's term securities lending facility. It is the first time in the three auctions held since the facility made its debut March 26 that dealers bid less than the total amount of securities available.
The March 26 auction of $75 billion in securities was oversubscribed by more than $11 billion and the April 3 auction of $25 billion in securities was oversubscribed by nearly $22 billion.
The facility, which lends Treasuries in exchange for less liquid mortgage-backed securities not backed by
Fannie Mae
(FNM)
and
Freddie Mac
(FRE)
and other assets, was created to help spur lending among banks who have been reluctant to do so since the onset of the credit crunch last summer.
The Fed's list of primary dealers includes units of
Goldman Sachs
(GS) - Get Report
,
Lehman Brothers
(LEH)
,
JPMorgan Chase
(JPM) - Get Report
and
Merrill Lynch
(MER)
.
This article was written by a staff member of TheStreet.com.