Coordinated Central Bank Action on Currency Swaps

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.

These central banks have agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points so that the new rate will be the U.S. dollar overnight index swap (OIS) rate plus 50 basis points. This pricing will be applied to all operations conducted from December 5, 2011. The authorization of these swap arrangements has been extended to February 1, 2013. In addition, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank will continue to offer three-month tenders until further notice.

As a contingency measure, these central banks have also agreed to establish temporary bilateral liquidity swap arrangements so that liquidity can be provided in each jurisdiction in any of their currencies should market conditions so warrant. At present, there is no need to offer liquidity in non-domestic currencies other than the U.S. dollar, but the central banks judge it prudent to make the necessary arrangements so that liquidity support operations could be put into place quickly should the need arise. These swap lines are authorized through February 1, 2013.

Federal Reserve Actions The Federal Open Market Committee has authorized an extension of the existing temporary U.S. dollar liquidity swap arrangements with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank through February 1, 2013. The rate on these swap arrangements has been reduced from the U.S. dollar OIS rate plus 100 basis points to the OIS rate plus 50 basis points. In addition, as a contingency measure, the Federal Open Market Committee has agreed to establish similar temporary swap arrangements with these five central banks to provide liquidity in any of their currencies if necessary. Further details on the revised arrangements will be available shortly.

U.S. financial institutions currently do not face difficulty obtaining liquidity in short-term funding markets. However, were conditions to deteriorate, the Federal Reserve has a range of tools available to provide an effective liquidity backstop for such institutions and is prepared to use these tools as needed to support financial stability and to promote the extension of credit to U.S. households and businesses.

See also:

Bank of Canada

Bank of England

Bank of Japan (PDF)

European Central Bank

Swiss National Bank (PDF)

Frequently Asked Questions: Foreign Currency Liquidity Swaps

The Strangest Commercial Ever Made

Just about the only television show I watch is "House", which has a nice cynical edge to it. I was shocked and disappointed on Sunday to witness within the program the most comically absurd product placement when, about a minute in the program, one of the doctors says to the other: "This neat curve control thing - - it automatically slows the car down when it senses I'm making a curve too fast." 

And all during that ridiculous quote, there were cutaway shots to the rear and front of the car prominently showing the Ford and Explorer logos. It was about as subtle as a comment from The Hun.

Coincidentally, I happened to trip across this item from the 1960s showing, of all people, Ms. Jane from the Beverly Hillbillies sucking on a Camel cigarette and singing its praises. Disturbing on so many levels.



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The yen, and portfolio management

I have been short the yen since November 2009, but today, I'm closing the directional position (although we're still short yen against Japanese equities). This was a portfolio decisions, rather than a directional decision.Viewing the remainder of this article requires a Subscription

Cramer on China’s Game Changing Reserve Ratio Cut

Haven't been a big fan of Cramer lately, but I 100% agree with his opinion on the cut in the reserve ratio for China banks. This is a game changer for China as the economy was beginning to show signs of slowing. China is clearly at the beginning of the interest rate cuts. Our favorite stocks to play the reemergence of China include coal producer Alpha Natural Resources (ANR), copper producer

Cramer on China’s Game Changing Reserve Ratio Cut

Haven't been a big fan of Cramer lately, but I 100% agree with his opinion on the cut in the reserve ratio for China banks. This is a game changer for China as the economy was beginning to show signs of slowing. China is clearly at the beginning of the interest rate cuts. Our favorite stocks to play the reemergence of China include coal producer Alpha Natural Resources (ANR), copper producer

Stock Market Manipulation

My research suggests that the secular bull market, which began at the 1974 low, peaked at the October 2007 high and that we have been in a bear market advance since the March 2009 low. According to Dow theory, all bull and bear markets unfold in 3 phases with important counter-trend moves separating each of the phases. As I have said all along, the rally out of the March 2009 low has been a bear market rally that should prove to separate Phase I from Phase II of the longer-term secular bear market that is now under way. Nothing has occurred to change this point of view. Since the rally out of the October low began, I have received a number of e-mails asking about manipulation and if "they" could prevent or if "they" have perhaps already prevented the phase II decline.
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