00:00How do you think a TGCR as the new benchmark rate would influence the shape of the yield curve?
00:08I don't think it should really change anything out the curve. I think it's just a better benchmark for our Fed to use.
00:16The Fed effective rate is a very strange market where really that entire market is made up of home loan banks lending to foreign banks.
00:25And foreign banks can arbitrage in that market where they receive, they pay Fed funds, which is lower than what they can receive by putting that same money they just borrowed from the home loan banks at the Federal Reserve.
00:39So today the difference is 409 versus 415. So they can get six free basis points.
00:44And that's kind of the whole market. You don't even see U.S. banks doing the same thing because U.S. banks have capital charges that eat away at the six basis points.
00:52So it's a tiny market. It's 70 to 100 billion per day compared to the rates that Lori Logan is talking about, which are 20 to 30 times more volume.
01:02It's a huge market. It's a real rate that market participants are paying and receiving as compared to Fed effective, which is just kind of this rate that's arbitraged.
01:13I would actually compare it to a version of the LIBOR market where it's not a real market that's trading all the time by saying we all know what happened to LIBOR.
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