Global Rates Watch: Global policy short guide: mid ‘26 edition

Research evidence excerpt

Global Rates Watch: Global policy short guide: mid ‘26 edition

g Kong)

Lending facilities: range of collateral & tenors TomonobuRates StrategistYamashita

Central banks have been built off Bagehot’s dictum: “lend freely against good collateral BofAS Japan tomonobu.yamashita@bofa.com

at a penalty rate”. Most lend against both risk-free government & credit collateral at or

Katie Craig

slightly above the top end of their target policy ranges. Central banks will typically lend Rates Strategist

at tenors ranging from overnight out to 3m or 6m. Facilities are typically provided for BofAS katie.craig@bofa.com

commercial banks & primary dealers, though loans can be on slightly different terms.

Edvard Davidsson

Central banks have also used non-standard lending programs to lend at longer terms. Rates Strategist

MLI (UK)

Deposit facilities: heavy lifters of rate changes edvard.davidsson@bofa.com

Central bank deposit facilities do the heavy lifting of rate changes in floor systems. All See Team Page for List of Analysts

DM central banks have deposit facilities available to commercial banks or credit

institutions. Several supplement these deposit facilities with a broader range of

counterparties including primary dealers, money funds, & agencies. Central banks that

have access to a wider range of depositors generally have better money market control

as they change policy rates. Banks with narrower deposit facilities have leakier floors.

Bottom line: similar tools, many nuances

DM central banks generally implement monetary policy with similar frameworks & in

similar ways. However, there are important differences in their policy tools,

counterparties, collateral regimes, & tenors. Changes in approach may also be coming.