I am. Foreign central banks around the world added reserves aggressively overnight. The Bank of Japan, for example, added ¥1 trillion, about $8.4 billion. Their Euroyen rates were trading a little above the target before their addition and below the target afterward. So the action was effective. The ECB today did a variable-rate tender, a little different from what they did yesterday. Yesterday they took all comers at 4 percent. In today’s variable-rate tender, they did not accept all the bids. They accepted €61 billion in bids. That’s down from the €94.8 billion they accepted yesterday. The average rate was 4.08 percent compared with their 4 percent target.
Coming into New York time this morning, the federal funds rate was under upward pressure—6 percent or so for foreign names and 5.75 percent for domestics. We did a $19 billion three-day RP (repurchase) this morning, a single tranche RP with a 5.15 percent effective rate. There were $31 billion in propositions, and we accepted $19 billion. After that action, the funds rate has come off a bit. Foreign names are now 5.5 to 5.63. Domestics are 5.25 to 5.5. We expect the funds rate to come off through the day. But if it doesn’t, we’re prepared to engage in additional transactions later in the day. Yesterday we were a bit surprised that, despite a $24 billion add through a term RP and an overnight, the effective funds rate was 5.41 percent—so, firmer than the target— although it did go out on the softer side at the end of the day at 4.75 to 5 percent.
In terms of the markets, there are two broad sets of issues. One, there are concerns about funding issues for two large U.S. financial entities. Washington Mutual and Countrywide have both made statements in their 10(q) filings that unnerved the market a little, Washington Mutual saying that they’re having some trouble in terms of liquidity and Countrywide saying that there are unprecedented disruptions in the credit market. Both of those companies have been singled out a bit this morning. In addition, there’s a tremendous amount of focus on the commercial paper market. The European commercial paper market is not doing well at all, and that’s really one reason that you’re seeing the European banks scramble for funding.
I talked to a dealer this morning in the U.S. commercial paper market. I guess the way I would characterize the situation is that the U.S. commercial paper market is continuing to function but at a very tough level of functionality. People are shortening up. They are starting to take names off their lists of programs they’ll invest with. The asset-backed commercial paper (ABCP) market is the area of greatest stress. The traditional programs, such as funding credit-card receivables, are still doing okay, but the extendable ABCP programs are under pressure. Also, apparently some investment bank programs are seeing some stress for their own names. There’s a lot of shortening of maturity. A lot of people are doing things that are either just overnight or out to a week. So you’re seeing that the funding in the U.S. commercial paper market is shortening, and therefore every day more and more commercial paper that has to be rolled over is coming due. But I would say that, at this point, the U.S. commercial paper market is still functioning, and that’s where we are right now.