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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Kailash who wrote (54283)	4/1/1999 8:42:00 PM
From: accountclosed	Read Replies (1) \| Respond to of 132070

I see the <g> in your post, so maybe I shouldn't say anything. My point was if we see this series of headlines: Monday 4 bln added in overnight repos Tuesday 4 bln added in overnight repos Wednesday 4 bln added in overnight repos --- that means they have added 4 bln over the time frame...not 12 bln ... And from what I read of people's reactions, it seems like each time they read it they think more...

To: Kailash who wrote (54283)	4/2/1999 3:06:00 AM
From: Tim McCormick	Read Replies (1) \| Respond to of 132070

The FF rate is not statically set by the Fed or the market each day, or even the same rate at the same time between different banks. It changes minute to minute depending on the supply and demand for cash in privately negotiated transactions between banks. There are lots of strange influences on the rate, usually related to particular dates. For example, Wednesday was the end of a quarter and banks like to pay up for funds to dress up that snapshot of their balance sheet. While today was a settlement date for newly issued gov. securities and maturity date and coupon payment date for outstanding bonds. New T-bills settle on Thursdays and old ones mature on Thursdays. Bonds and notes mature settle and pay their coupons on the 1st and 15th of every month. So, when the 1st or 15th are a Thursday it can get weird. And it gets even weirder when that 1st is before a long weekend because messing up for three days is triple bad. Each bank wants to earn as much as possible on their overnight cash balances. But they have all these corporate and retail customers who sometimes don't decide what to do with their maturing securities or coupon payments until the last minute. Not to mention monthly payrolls and social security checks. All these billions flying around and nobody knows how much will find a home in securities or be left in cash untill the day plays out. At sometime in the afternoon, I think it is 1:15 EST, they shut down the ability to wire funds. Then your stuck with what you worked out. So a target FF rate is just that, a target. To read anything into the day to day fluctuations and Fed responses as an indicator of demand for credit or Fed policy is much more complex than can be interpreted by press releases. Tim