Examination of Treasury Term Investment Interest R

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Examination of Treasury Term Investment Interest Rates: A Reprint from “Economic Policy Review”

In Nov. 2003, the Term Investment Option (TIO) pro

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By Warren B. Hrung (au)
Year: 2007
Pages: 14
Binding Paperback

Product Code: 1422315274

Description

In Nov. 2003, the Term Investment Option (TIO) program became an official cash management tool of the U.S. Treasury Dept. Through TIO, the Treasury lends funds to banks for a set number of days at an interest rate determined by a single-rate auction. The Treasury introduced TIO to try to earn a market rate of return on its excess cash balances. This article studies 166 TIO auctions from 11/03 to 2/06 to determine how TIO interest rates have compared with market rates. Investigates the spread between TIO rates & rates on mortgage-backed-security repossessions. Aside from offerings with very short term lengths, the Treasury receives an interest rate on TIO auctions comparable to market rates. Charts & tables.

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