2:35 pm : The major indices climb to their best levels of the session. The New York Fed has announced modifications to its new Term Securities Lending Facility (TSFL). The TSFL auctions will now allow schedule 2 collateral, instead of the schedule 1 collateral previously proposed. Schedule 2 collateral will now include collateralized mortgage obligations (CMOs) and AAA rated commercial mortgage-backed securities
In other words, the Fed will be lending banks highly liquid Treasury securities in exchange for less liquid assets. Banks will now be able to use a wider range of collateral than previously announced. The first auction will take place on March 27.
Does this have the smell of 'Junk Bonds' to anyone else besides me?