in my @FTAlphaville post, I followed the IMF in assuming that central bank swaps come with fx-related margin calls.
It turns out I was wrong: the Fed does not call margin on its peers when, throughout the life of the swap, the actual rate moves away from agreed exchange rate.
It turns out I was wrong: the Fed does not call margin on its peers when, throughout the life of the swap, the actual rate moves away from agreed exchange rate.
this matters because the new FIMA repo facility creates a two-tier hierarchy of central banks:
1. Swap$ central banks, Fed treats as peers
2. Repo$ central banks, Fed treats as private commercial banks, who can borrow against their Treasuries
1. Swap$ central banks, Fed treats as peers
2. Repo$ central banks, Fed treats as private commercial banks, who can borrow against their Treasuries
the second tier - South Africa for instance - is limited in its access to USD by their portfolio of Treasuries, and by margin calls the Fed will make if those Treasuries fall in price.
overnight FIMA $repos are moving official fx reserve managers into the Fed, away from private repo markets.
better funding conditions there.
better funding conditions there.
