Despite growing concerns about a severe credit crisis, the Federal Reserve Board's $150 billion cash auction Monday attracted bids totaling only $138.1 billion.
The Fed's sales are typically oversubscribed, and Monday's results raised questions about the industry's interest in the auctions.
"It says there's not as much demand as they anticipated," said Bert Ely, an independent consultant in Alexandria, Va.
The Fed announced Monday that it would expand the auctions to $150 billion, from $75 billion, for the rest of the year. The funds from Monday's sale went to 71 bidders who will pay a 1.39% interest rate. The loans will mature Jan. 2.
Meanwhile, the Fed said Tuesday it would hold a $150 billion auction Dec. 15. The central bank already announced The Fed had previously not announced auctions beyond Nov. 17.
The Fed also will hold two "forward auctions" worth $150 billion each Nov. 10 and Nov. 24. The forward auctions differ from the traditional sales because the loans do not settle for several weeks to ensure liquidity is available over the yearend period.