Off The Wire
New York Fed says it will introduce $1.5 trillion in new repo operations and change maturities of Treasury purchases
(Reuters) - The Federal Reserve Bank of New York said on Thursday it will introduce $1.5 trillion in new repo operations this week and start purchasing a range of maturities as part of its monthly Treasury purchases.
The central bank will offer $500 billion in a three-month repo operation on Thursday. It will offer an additional $500 billion in one-month repo and $500 billion in three-month repo loans on Friday.
This marks the third substantial increase in repo support announced by the U.S. central bank this week, a sign the Fed is taking drastic steps to inject more liquidity into the banking system as markets begin to show signs of stress.
The Fed is also making notable changes to the maturities of the Treasury securities it purchases monthly to increase reserves. Starting on Friday, the central bank will buy across a range of maturities to match the composition of Treasury securities outstanding, including coupons, bills, Treasury Inflation-Protected Securities and Floating Rate Notes.
Until now, the Fed had focused its purchases on short-term Treasury bills, a move meant to emphasize that the balance sheet expansion was part of a technical effort to increase liquidity and not a way to provide stimulus.
U.S. stock markets cut losses after the Fed announced the adjustments. The changes were made at the direction of Fed Chair Jerome Powell, in consultation with the Fed’s policymaking panel, the New York Fed said.
Reporting by Jonnelle Marte and Ann Saphir; Editing by Dan Grebler