Executive summary

• While QE is a FED open market operation that buys bonds out of the market compressing yields and easing monetary conditions, BTFP is a credit facility which enables bondholders to use their bond as collateral valued at par in turn for a loan. In that sense the BTFP is an instrument aimed at directing liquidity to the bondholders with the heaviest capital losses, rather than keeping a ceiling on yields overall. The BTFP is hence an extremely generous version of the goold old discount window. 
• In effect both instruments add liquidity through the system much the same way. While QE buys securities directly, BTFP makes sure that losing bondholders are no longer forced sellers. BTFP allows the FED to cover healthy actors’ solvency drain with less liquidity than what an QE operation with the same aim would require. But if defaults manifests BTFP would defacto become QE. 
• Both tools affect the market much the same way. Read below for a full detailed account 
  
  

On March 12, the Federal Reserve Board announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.

Sounds swell, but is this just another form of QE? Not really, but under certain circumstances it could turn into something with astounding resemblance to QE. 

We’ll in this short explainer take the plunge and try to demystify the concept and moving parts underlying the so-called ‘Bank Term Funding Program’ – from this point forth referred to as the ‘BTFP’.