The Interbank Market
U.S. Treasury rates
The two-year, ten-year, and thirty-year Treasury rates all increased between 9:43 am this morning and 4:52 pm this afternoon. According to Treasury data, the two-year rate stayed relatively the same, moving from 4.26% to 4.29%. The ten-year rate increased from 4.47% to 4.55%, while the 30-year rate moved from 4.69% to 4.77%.
Board of Governors of the Federal Reserve System
According to data as of 10 February 2025 from the Board of Governors, the EUR/USD is priced at 1.0329 while the USD/JPY is priced at 151.30.
Federal Reserve Bank of New York reference rates, foreign exchange intervention
The Effective Federal Funds Rate for domestic unsecured borrowings between commercial depository institutions is at 4.33%. The Overnight Bank Funding Rate, a measure of wholesale, unsecured overnight bank funding costs, also held at 4.33%.
The Secured Overnight Financing Rate, which measures the cost of borrowing cash overnight secured by Treasury securities, came in at 4.33%, while the Broad General Collateral Rate, a measure of rates on overnight Treasury general collateral repurchase agreement transactions, came in at 4.31%.
The Tri-Party General Collateral Rate, a measure of rates on overnight, specific counterparty, tri-party general collateral repurchase agreement transactions, came in at 4.31%.
Will Trump’s latest executive order on independent agencies challenge the independence of the Federal Reserve?
Executive Office of the President
President Donald J. Trump today issued an executive order intended to ensure that all executive power is vested in the Executive Office of the President including the actions of independent agencies. Mr. Trump asserts in the executive order that all executive branch officials and employees are subject to his supervision. Mr. Trump wants all executive agencies to submit all draft regulations to the White House for review, with an exception for the Federal Reserve’s monetary policy.
History is littered with the Executive’s attempt to exercise control over independent agencies. For example, the U.S. Supreme Court in Humphrey’s Executor v. United States, 295 US 602 (1935) addressed the issue of a president’s authority to remove the head of the Federal Trade Commission. The Court distinguished between a non-partisan body of experts carrying out quasi-judicial and quasi-legislative functions from an (executive) agency that carried out primarily executive functions. The Court held that:
“The Federal Trade Commission, in contrast, is an administrative body created by Congress to carry into effect legislative policies embodied in the statute in accordance with the legislative standard therein prescribed, and to perform other specified duties as a legislative or as a judicial aid. Such a body cannot in any proper sense be characterized as an arm or an eye of the executive. Its duties are performed without executive leave and, in the contemplation of the statute, must be free from executive control.” Humphrey’s Executor v. U.S., 295 U.S. 602, 603 (1935)
While Humphrey’s Executor was about the President’s authority to remove an agency head, the broader issue was whether the President’s attempt to remove a commissioner violated the separation of powers. I expect some members of Congress to view Mr. Trump’s executive order as an attempt to influence monetary policy using “accountability to the American people” as a backdoor to monetary policy making.
But the executive order may force a court to visit the issue of whether the Board of Governors of the Federal Reserve System is part of the executive branch. The Board of Governors activity is more quasi-judicial (carrying out enforcement hearings as part of its bank supervision function) and quasi-legislative (issuing rules that facilitate meeting Congress’ objectives). Given these activities, at first blush, the Board of Governors may fall outside of Mr. Trump’s executive reach.
Combined with the Fed’s staunch defense of its political independence, Mr. Trump may not have success getting the Fed to submit its draft rules for his review.
Alton Drew
18 February 2025
If you are in need of research on the impact of the current legal environment on the Federal Reserve and the interbank market, reach out to me at altondrew@altondrew.com.
DISCLAIMER: I am not a financial adviser. These blog posts are for educational purposes only. Trading of any kind involves risk. Your trading decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary.
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