When the Fed ostensibly guarantees a positive risk-free return, such a deal is difficult to turn down, which is precisely what is happening with money-center banks and the Treausry curve. Free financing for a positive return, and precious few prospects for continued lending given aggregate demand...and the political administration wonders why their calls to action on credit leniancy fall on deaf ears...
Access to Treasury bond auctions is now a massive competitive advantage to the money center banks, and bond auctions will go very well until this imbalance is corrected.
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