Straw poll on why Fed SOMA program rates are so low

Today’s Federal Reserve securities lending operations show two securities on special, with one bumping up against the 3% ceiling where it becomes more cost effective to fail then to pay the borrow cost.

Trade Date Security Actual Avail to Borrow Par Accepted Weighted Avg Rate (bps) Percent Loaned
Sept 8 2011 T 02.125 08/15/21 544,000,000 544,000,000 2.983 100%
Sept 8 2011 FHLMC 03.750 03/27/19 55,000,000 39,000,000 0.1 71%

Meanwhile, the Fed maintains the other 119 securities on loan at a low and potentially artificial rate of 5 bps.

A straw poll for why the Fed keeps the vast majority of these repo rates at 5 bps:

a) Settling a grudge against the banking industry for making them work too many weekends.

b) Proving that the Federal Reserve are the true masters of the universe, not hedge funds.

c) An insistence that Treasuries can not go down, hence why would repo be priced over 5 bps?

The Fed data are here.

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