Fed’s Newest Tool Has Become More Attractive on Rate-Cut Bets
- Use of Bank Term Funding Program rose to record $124 billion
- Swaps pricing 140 basis points of rate cuts by December 2024
The US Federal Reserve Building in Washington, DC.
Photographer: Saul Loeb/AFP/Getty ImagesThis article is for subscribers only.
A Federal Reserve lending facility crafted this March to support ailing banks is looking better than ever after the central bank’s dovish pivot last week as the expectation of aggressive interest-rate cuts makes the rate more alluring.
The Bank Term Funding Program, or BTFP — launched earlier this year as the banking crisis roiled markets — allows banks and credit unions to borrow funds for up to one year, pledging US Treasuries and agency debt as collateral valued at par. The rate for these advances will be the one-year overnight index swap rate plus 10 basis points.