Bank & Treasury Management - BSF222
Agustin Mackinlay

a.mackinlay@euruni.edu

Session 4 - February 21, 2012
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Central Bank Liquidity Swaps

- A very recent topic. No discussion in textbooks!

- [VIDEO].

- [VIDEO] Ben Bernanke, the Fed chairman, on swaps. Very nervous!

- The latest round of central bank liquidity swaps was announced on November 30, 2011 [see].

- We can check the numbers by looking at the Federal Reserve’s weekly balance sheet.

- October 29, 2008: Fed and central banks of Brazil, Mexico, Singapore and South Korea ($30bn each).

- CHART BRAZIL 5-YEAR CDS


An introduction to Eurodollar futures****

- Chicago Mercantile Exchange: Contract Specifications

- Eurodollar futures are a complete misnomer: they refer to the LIBOR interest rate, not to the €/$ exchange rate between the currencies. The LIBOR rate is the rate at which banks lend to each other; it is heavily influenced by the ‘target’ rate set by the central bank. 

- Eurodollar futures are an exchange-traded product, as opposed to an over-the-counter market. The clearing house is the Chicago Mercantile Exchange; see Contract Specifications
- CHART: US monetary base; CHART: US Banks reserves at the Federal Reserve

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