St Louis Fed says TAF announcement raised risk premiums
A St Louis Federal Reserve paper published on Friday shows the Federal Reserve's Term Auction Facility (TAF) had the undesired effect of increasing the risk premium on US Treasury bills.
Daniel Thornton, the paper's author, analyses the impact the Fed's unconventional TAF programme had on the spread between the London Interbank Offered Rate (Libor) and equivalent-term Treasury rates by assessing its effect on the liquidity premium embedded in Libor rates.
His research shows that rather than
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