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  • Writer's pictureStephen H Akin

Watch 2's and 10's

Inversion of 2 & 10 year T-Bond Yields is often a harbinger of a decline in the economy.

An inverted yield curve is a favorite recession indicator of the Federal Reserve Board. When inverted it suggests that the near-term is riskier than the long term.

Bond markets are flashing a warning signal about the growth prospects for the US economy, just as central bankers prepare to tackle soaring inflation with higher interest rates. The gap between long-term and short-term government borrowing rates in big developed economies has narrowed drastically since the autumn. In the US, a so-called “yield-curve inversion” of the two and ten year Treasury Bonds are often a harbinger of a decline in the economy.

Yesterday the Federal Reserve issued the minutes from their last Open Market Committee Meeting.

Members agreed that, in assessing the appropriate stance of monetary policy, they would continue to monitor the implications of incoming information for the economic outlook. They would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. Members agreed that their assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive, for release at 2:00 p.m.:

"Effective February 2, 2023, the Federal Open Market Committee directs the Desk to:
  • Undertake open market operations as necessary to maintain the federal funds rate in a target range of 4-1/2 to 4-3/4 percent.

  • Conduct overnight repurchase agreement operations with a minimum bid rate of 4.75 percent and with an aggregate operation limit of $500 billion; the aggregate operation limit can be temporarily increased at the discretion of the Chair.

  • Conduct overnight reverse repurchase agreement operations at an offering rate of 4.55 percent and with a per-counterparty limit of $160 billion per day; the per-counterparty limit can be temporarily increased at the discretion of the Chair.

  • Roll over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing in each calendar month that exceeds a cap of $60 billion per month. Redeem Treasury coupon securities up to this monthly cap and Treasury bills to the extent that coupon principal payments are less than the monthly cap.

  • Reinvest into agency mortgage-backed securities (MBS) the amount of principal payments from the Federal Reserve's holdings of agency debt and agency MBS received in each calendar month that exceeds a cap of $35 billion per month.

  • Allow modest deviations from stated amounts for reinvestments, if needed for operational reasons.

  • Engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions."


Download PDF • 414KB


Agencies issue joint statement on liquidity risks resulting from crypto-asset market vulnerabilities

Federal bank regulatory agencies today issued a joint statement highlighting liquidity risks to banking organizations associated with certain sources of funding from crypto-asset-related entities and some effective practices to manage those risks.

Recent events in the crypto-asset sector have underscored the potential heightened liquidity risks presented by certain sources of funding from crypto-asset-related entities. The joint statement highlights key liquidity risks and some effective practices to monitor and appropriately manage those risks. The statement reminds banking organizations to apply existing risk management principles; it does not create new risk management principles.

Banking organizations are neither prohibited nor discouraged from providing banking services to customers of any specific class or type, as permitted by law or regulation.


  • Board of Governors of the Federal Reserve System

  • Federal Deposit Insurance Corporation

  • Office of the Comptroller of the Currency

For release at 10:00 a.m. EST February 23, 2023

Download PDF • 188KB

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