Fed Likely to End Bank Funding Program in March

 The Fed introduced the Bank Term Funding Program, or BTFP, earlier this year as the banking crisis roiled markets. The program 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 loans — one-year overnight index swaps plus 10 basis points — is currently 4.84% and 56 basis points lower than the rate for interest on reserve balances.

Bloomberg 26 December 2023

https://www.bloomberg.com/news/articles/2023-12-26/fed-likely-to-end-bank-funding-program-in-march-says-wrightson

Banking Crisis Plays Out at America’s Smallest Lenders

Rural community banks are at risk from giant underwater bond portfolios

Industry Bancshares, with some $5 billion in assets, is the parent company of six banks in eastern Texas.

Industry is currently more than $75 million underwater because it piled into long-term bonds when rates were low. Those bonds plunged in value and the bank’s liabilities have been exceeding its assets since soon after the Fed started to hike rates in 2022. 

More than 300 banks had half of their assets in securities in the third quarter, Federal Deposit Insurance Corp. data analyzed by The Wall Street Journal showed.

WSJ 27 December 2023

https://www.wsj.com/finance/banking/banking-crisis-plays-out-at-americas-smallest-lenders-0a73211c

BTFP, stands for Bank Term Funding Program

https://englundmacro.blogspot.com/2023/03/btfp-stands-for-bank-term-funding.html

Silicon Valley Bank is just the tip of the iceberg

Englund: ‘Silicon Valley Bank is just the tip of the iceberg’ (englundmacro.blogspot.com)