Treasury's $200 billion debt sale will help Fed's liquidity drain

02/23/2010 | Financial Times (tiered subscription model)

As the Federal Reserve prepares to drain liquidity from the financial system, the Treasury Department gave the effort a boost with a plan to sell $200 billion in short-term debt. The Treasury will store proceeds from the sale at the Fed. "This move does mean there will be $200 billion fewer reserves in the banking system, which could provide a little bit of lift to the effective fed-funds rate," said Michael Feroli of JPMorgan Chase. "As such, it could be seen as a first step in putting the Fed in position to raise rates."

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