Wrightson’s analysis of Fed financial statements revealed that from January 1 to January 24—just before the rate hike took effect—the BTFP saw a substantial $38.6 billion increase in usage, rising from a year-end level of $129.2 billion.
Wrightson ICAP economist Lou Crandall explained: “Banks in many districts found the concessionary terms of the program too good to pass up in early January. One-year loans with general collateral requirements and sub-5% rates were an attractive offering.”
Banks within the Federal Reserve’s San Francisco district were the most active borrowers, accounting for $8 billion in BTFP usage growth. The Boston region took out $4 billion in new loans that month, while six other areas experienced more moderate increases of $2 billion to $3 billion.
After the Fed decided to raise interest rates, BTFP borrowing activity declined significantly. In some districts, such as Atlanta and St. Louis, repayments may have surpassed $1 billion.
Additionally, since the facility’s expiration on March 11, approximately $35 billion in loans have been repaid, with declines concentrated in the San Francisco, Dallas, and Minneapolis regions.
Source: mpamag.com