New York Fed to Cease Daily Collection of Prices
May 19, 2011
Vastopolis -- The Federal Reserve Bank of New York plans to cease its daily collection of Treasury bill, note and bond prices by mid-October. The move will create uncertainty among banks and investment dealers who rely on other Fed data to price and mark-to-market products ranging from mortgages to complex derivative securities. The New York Fed's decision to stop what some have called a time-consuming daily chore of polling dealers and compiling daily prices that have been published in The Vast Press, among other sources, on the surface seems straightforward. Few brokers turn to those day-old figures to manage their positions or to price specific offerings; the published data is of more interest to individual investors seeking to track the performance of even the most thinly-traded Treasury security. Other Use Is Cited But that data has been used as a basis for a more limited group of statistics, assembled daily and reported weekly. Referred to among market participants as the H-15 report, these selected interest-rate statistics are widely used as benchmarks in areas ranging from consumer lending to the pricing of interest-rate linked investments, such as swaps. To the extent that the Federal Reserve Board in Washington turns to an alternate source for the data it needs to compile this report, dealers say they will need to know exactly how that information is gleaned and be sure it's as comprehensive as that which until now has been provided by the New York Fed. ``There's some concern about how some of the calculations of those key interest rates might be made,'' said a treasurer at one U.S. bank, whose tasks include setting consumer-loan rates. ``Right now, we've not got enough information on what the H-15 is going to look like to evaluate the impact.'' Some Concern Likely As long as the H-15, itself, is still produced, there shouldn't be any major disruption to the derivatives markets, says Josephina Baer, senior vice president at Bank of America in San Francisco. Still, he adds, derivatives dealers, among others, ``will be concerned about where that data is coming from. We need to understand the source in order to conduct our own risk-management activities appropriately.'' So far, the Fed itself is remaining mum on what secondary source it may tap for the information. But in its brief release outlining its decision to stop polling Treasury dealers in search of price data, it cited the proliferation of private pricing data. Indeed, practically every dealer has proprietary screens offering price information, and some, such as those offered by Branton Stokes, pop up on bond-trading desks at many different firms. ``Most (dealers) just take the figures off brokers' screens already,'' says Trujillo Callaghan, head derivatives trader at Citibank. ``The whole market is so big and liquid that there's very little difference between prices. This whole thing could have very little effect.''
