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Apr 17, 2008 2:49 pm US/Eastern
Fed Auctions Nearly $25B In Treasury Securities
WASHINGTON (AP) ―
The Federal Reserve has auctioned nearly $25 billion in super-safe Treasury securities to big investment firms, part of an ongoing effort to relieve credit strains.
The auction -- the fourth of its kind -- was held Thursday, where the Fed auctioned another $24.999 billion in the securities. Bidders paid an interest rate of 0.1000 percent. The Fed received bids of $35.1 billion worth of the securities.
In exchange for the 28-day loan of Treasury securities, bidding firms can put up more risky investments, including certain shunned mortgage-backed securities, as collateral.
In the four auctions held so far, the Fed has provided close to $158.95 billion worth of the Treasury securities to financial firms.
At last week's auction, the Fed had bids for $33.95 billion worth of the securities -- less than the $50 billion in securities that the Fed was making available. Some analysts read that as a hopeful sign that credit turmoil in this part of the market was easing a bit.
The auction program is intended to help financial institutions and the troubled mortgage market. The Fed said it would make as much as $200 billion worth of Treasuries available through weekly auctions.
The goal is to make investment houses more inclined to lend to each other. It also is aimed at providing relief to the distressed market for mortgage-linked securities. Questions about their value and dumping of these securities have driven up mortgage rates, aggravating the housing slump.
The lending program is one of several extraordinary actions the Fed has taken recently to limit damage from a trio of crises -- housing, credit and financial.
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