We have just gotten a peek behind the curtain of secrecy at the Fed; today they published a "Clarification of Collateral Tranches on Desk RP Operations: http://www.newyorkfed.org/markets/omo/dmm/temp.cfm.
In sum, there are three tranches that request offerings of paper with decreasing credit quality.
"From time to time, for operational simplicity, the Desk has arranged RPs just in the third tranche, under which dealers have the option to pledge either mortgage-backed securities issued or fully guaranteed by federal agencies, federal agency debt, or Treasury securities. Today's RPs were of this type. August 10, 2007
2 comments:
A reader asks, "...how is it that you can buy and sell an index based on signals you won't know until a month later?"
Obviousely, investing a month after a trend appears is difficult. This is the limitation, however, of going back 45 years to cover multiple cycles under varying economic and political environments. It is also the limitation of working with Federal Reserve data that is available on just a monthly basis for that time period.
Deb,
I think you misunderstand the question. The question is, "How do you invest this month, with a signal that doesn't actually appear until next month?"
Do you see the difference?
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