Monday, April 6, 2009

UK To Provide Liquidity To US?

Just made headlines: Bank of England announces swap arrangement to provide liquidity to US Federal Reserve.

We agree - the US will need all the liquidity it can get.

Update: as is usually the case, Headline writers always invert the facts: turns out these are reciprocal swaps with 5 central banks that would provide foreign currencies to U.S. financial institutions for a total amount of roughly $180 billion. Hmm - is the world running out of non-dollars?

Here is the full press release from the Fed.
The Federal Open Market Committee has authorized new temporary reciprocal currency arrangements (foreign currency liquidity swap lines) with the Bank of England, the ECB, the Bank of Japan, and the Swiss National Bank. If drawn upon, these arrangements would support operations by the Federal Reserve to provide liquidity in sterling in amounts of up to £30 billion, in euro in amounts of up to €80 billion, in yen in amounts of up to ¥10 trillion, and in Swiss francs in amounts of up to CHF 40 billion.
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Anonymous said...

Just made headlines: Bank of England announces swap arrangement to provide liquidity to US Federal Reserve.


They have it backwards. The Fed is providing liquidity to the UK.

Anonymous said...

these are reciprocal swap lines, US has already provided them to many other central banks, now other central banks providing them to fed to increase global liquidity.

i'm not sure we can read much more than that into it, US has been ahead of the curve here, now others following through.. UK is way worse than US anyway.

S said...

So they print momney and buy each others debt - wait that soudns familiar kind of like PPIP goes sovereign...

Anonymous said...

The new swap lines, aimed at providing foreign currency liquidity to U.S. financial institutions, mirror earlier approved swap arrangements aimed primarily at providing dollar liquidity to foreign financial institutions

The new swaps were created as a precaution in case, a need arises
for a U.S. bank to borrow foreign currency when the Federal Reserve's
system is closed or on holiday. In that case, it could borrow the
foreign currency it needs from the appropriate foreign central bank,
which would draw on its swap line with the Fed.