Fed auction results Thursday may indicate a turning point in the credit crisis. Are financials poised to make a sustained rally?
CNBC Senior Economics reporter Steve Leisman joins the panel for this conversation. Following is a summary of his main points.
Wall Street dealers borrowed fewer Treasuries than the Federal Reserve offered in its latest 28-day auction on Thursday, a possible sign of easing stress on the companies' balance sheets, explains Liesman.
Primary dealers submitted only $33.95 billion of bids for the $50.0 billion of Treasury securities auctioned. (The auction is part of a new $200 billion program aimed at helping Wall Street dealers.)
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HOW THE FED'S FIGHTING THE CREDIT CRUNCH
Loans – cash for illiquid assets like mortgages
Swaps – liquid assets like treasuries for illiquid assets
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The bids in the latest auction lagged the $46.9 billion in bids at last week's auction.
If that seems confusing, the bottom line here is that banks don’t need as much money as the Fed has offered or as much as they needed last week.
Traders, would you buy financials on this news?
I think the news is a sign that the financials are creaking back to life, observes Jeff Macke. It’s probably okay to dip your toe.
