Data on Fed borrowing does not look pretty !! BTFP and Credit Extensions show flight of deposit

 Data released on reserves held by depository institutions that were borrowed from the Federal Reserve through the Discount Window (DW), Paycheck Protection Program (PPP) Liquidity Facility (PPPLF), Bank Term Funding Program (BTFP) announced on Mar 12 and other lending facilities show a sharp surge in use of Federal Reserve Facilities. Refer to earlier article.

In the press conference, Fed Chair Jerome had explained the Credit Extensions as Fed is lending to the bridge bank and it’s a loan that’s 100 percent guaranteed by the FDIC so there’s no risk in it for us which I had highlighted in the earlier note too.

There is a + USD 42 bn increment in the BTFP and Other Credit extensions has risen by USD 37 Bn. Also the foreign repo facility saw an uptake of USD 60 bn.