Thursday, March 12, 2020

New York Fed to boost repo operations further

     The Federal Reserve Bank of New York, which implements U.S. monetary policy, is injecting massive amounts of liquidity into financial markets to ensure they continue to function smoothly and address "highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak."
      Following instructions from Federal Reserve Chair Jerome Powell, the Open Market Trading Desk of the New York Fed said in a statement it was changing the maturity composition of its planned purchases to support the functioning of the market for Treasury securities, and also adding term repo operations "in large size" to enhance the functioning of dollar funding markets.
      The New York Fed, which already boosted its supply of liquidity by raising the amount of overnight repo operations and 2-week repos on March 9 and March 11, today offered $500 billion in a 3-month repo operation and will offer the same amount in a 3-month repo operation on March 13.
     In addition, the New York Fed will offer $500 billion in a one-month operation on March 13, and said 3-month and one-month repo operations of $500 billion will be conducted on a weekly basis for the rest of this month.
     The trading desk added that it would continue to offer at least $175 billion in daily overnight repo operations and at least $45 billion in 2-week term repo operations twice a week during the same period.
     As part of the Fed's scheduled $60 billion reserve management purchases for the month beginning March 13 and through April 13, the trading desk will purchase securities across a range of maturities to roughly match the maturity compositions of Treasury securities outstanding, specifically across 11 sectors, including bills, Treasury Inflation-Protected Securities, and floating rate notes.
     Reserve management purchases into the second quarter will continue to be conducted with this maturity allocation, the Fed said, with the terms adjusted as needed to foster smooth market functioning and effective policy implementation.



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