Transcripts of the monetary policymaking body of the Federal Reserve from 2002–2008.

No. But this is what single-price auction theory is about, figuring out what the equilibrium bid function is. Presumably they make some inference and act on it, and presumably they are doing that calculation now in deciding how much to bid to guarantee them a certain probability. Right? So this auction would provide insurance, as I interpret it, against the TSLF fee being higher than they would otherwise think it would be or being unanticipatedly high—equivalently, the spread between agency MBS and Treasury GC (general collateral) repo rates being unanticipatedly high. Is that a good interpretation of what this option would provide in economic terms to the participants?

Keyboard shortcuts

j previous speech k next speech