We note Alea has picked up on news that the US Federal Reserve intends to extend its liquidity facilities and currency swap lines with the following exclamation:
Fed Capitulates: Extends ALL Existing Liquidity Programs and Swaps
For reference here’s the full story from Reuters:
WASHINGTON, Feb 3 (Reuters) – The U.S. Federal Reserve extended liquidity facilities for domestic financial institutions and currency swap lines with 13 central banks on Tuesday to keep money flowing in a banking system shattered by the worst financial crisis since the Great Depression.
“Continuing substantial strains in many financial markets” made the actions necessary, the Fed said in a statement.
The Fed said it would extend, through Oct. 30, facilities providing loans and liquidity to the commercial paper and money markets. The U.S. central bank is also keeping open through that date facilities providing loans and Treasuries to primary dealers.
The Fed further said it is extending currency swap lines with Australia, Brazil, Canada, Denmark, England, the euro zone, South Korea, Mexico, New Zealand, Norway, Singapore, Sweden and Switzerland. Japan will consider the extension at its next policy meeting, the Fed said.
The liquidity facilities — the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF), the Commercial Paper Funding Facility (CPFF), the Money Market Investor Funding Facility (MMIFF), the Primary Dealer Credit Facility (PDCF) and the Term Securities Lending Facility (TSLF) — and the swap lines had been set to expire on April 30.
Unfortunately, we note this all comes a day too late for the likes of the Swiss National Bank, which on Monday announced it would be issuing short-term dollar bills to finance a loan supporting the fund it set up to deal with toxic assets owned by UBS. We presume the move had something to do with securing dollar inflows just in case the Fed’s April 30th swap-line expiry was not extinguished.
The SNB’s move follows in the footsteps of the French government which announced on January 19th it would be issuing US dollar-denominated short-term debt through its Societe de Financement de l’Economie Francaise framework, set up to ensure financing support for its own banks.