Anyone smart enough to translate this into what it means to average investors? Should it shore up stock prices in the short term?
Fed to Increase Temporary Liquidity Available To Markets
Minimum size raised for overnight, longer-term operations
By
Michael S. Derby
Oct. 23, 2019 5:50 pm ET
The Federal Reserve Bank of New York is boosting the amount of temporary liquidity it is willing to make available to financial markets starting this week, the bank said on Wednesday.
It said that as of Thursday, the minimum size of its overnight repurchase-agreement, or repo, operations will rise to $120 billion, from what had been at least $75 billion. Longer-term operations will rise from a minimum daily offering size of $35 billion and go up to $45 billion in interventions scheduled for Thursday and Oct. 29. The longer-term repo operations are scheduled to carry over into November.
The Fed said it was raising the minimum operation sizes “to mitigate the risk of money market pressures that could adversely affect policy implementation.”
Fed repo operations add liquidity to financial markets by loaning cash to eligible banks in return for taking in Treasury debt, which effectively functions as collateral for the loans. The Fed restarted large-scale repo operations a month ago when confronted with unexpectedly big swings in money market borrowing rates.
Interest rates spiked ahead of the September Federal Open-Market Committee meeting for a number of factors. Much of it was due to tax payments and Treasury debt settlements. But as part of an effort to tamp down on market volatility, the New York Fed have made large-scale repos a regular occurrence again.
The Fed is seeking to further reduce the prospect of money-market rate volatility with around $60 billion in Treasury bill purchases a month into next year, as part of an effort to grow the size of its nearly $4 trillion balance sheet.
The increased size of the operations announced by the New York Fed Wednesday come as the Federal Open Market Committee is about to meet to deliberate on monetary policy next week. The panel is widely expected to lower rates again by a quarter percentage point next Wednesday. The Fed’s increased liquidity offering could be a bid to further ensure market rates don’t spike again, as they did ahead of the September FOMC meeting.
In recent overnight repo interventions, banks have taken less than the central bank has been willing to offer. On Wednesday, the Fed added $49.845 billion in one-day liquidity to financial markets. The overnight repurchase-agreement operation took in $42.254 billion in Treasurys, $100 million in agency securities and $7.5 billion in mortgage-backed securities.
Last week, New York Fed leader John Williams told reporters the Fed is still trying to figure out how to deal with the market’s liquidity needs, which in turn affect short-term rates and the Fed’s ability to influence the cost of borrowing.
“We’re going to continue to learn through January, since we’re going to keep these repos going through some periods of, you know, various conditions, especially year-end stress. I think we’ll learn from that” and have new insights into whether a change is needed, or current plans will hold, Mr. Williams said.
Write to Michael S. Derby at michael.derby@wsj.com
Fed to Increase Temporary Liquidity Available To Markets
Minimum size raised for overnight, longer-term operations
By
Michael S. Derby
Oct. 23, 2019 5:50 pm ET
The Federal Reserve Bank of New York is boosting the amount of temporary liquidity it is willing to make available to financial markets starting this week, the bank said on Wednesday.
It said that as of Thursday, the minimum size of its overnight repurchase-agreement, or repo, operations will rise to $120 billion, from what had been at least $75 billion. Longer-term operations will rise from a minimum daily offering size of $35 billion and go up to $45 billion in interventions scheduled for Thursday and Oct. 29. The longer-term repo operations are scheduled to carry over into November.
The Fed said it was raising the minimum operation sizes “to mitigate the risk of money market pressures that could adversely affect policy implementation.”
Fed repo operations add liquidity to financial markets by loaning cash to eligible banks in return for taking in Treasury debt, which effectively functions as collateral for the loans. The Fed restarted large-scale repo operations a month ago when confronted with unexpectedly big swings in money market borrowing rates.
Interest rates spiked ahead of the September Federal Open-Market Committee meeting for a number of factors. Much of it was due to tax payments and Treasury debt settlements. But as part of an effort to tamp down on market volatility, the New York Fed have made large-scale repos a regular occurrence again.
The Fed is seeking to further reduce the prospect of money-market rate volatility with around $60 billion in Treasury bill purchases a month into next year, as part of an effort to grow the size of its nearly $4 trillion balance sheet.
The increased size of the operations announced by the New York Fed Wednesday come as the Federal Open Market Committee is about to meet to deliberate on monetary policy next week. The panel is widely expected to lower rates again by a quarter percentage point next Wednesday. The Fed’s increased liquidity offering could be a bid to further ensure market rates don’t spike again, as they did ahead of the September FOMC meeting.
In recent overnight repo interventions, banks have taken less than the central bank has been willing to offer. On Wednesday, the Fed added $49.845 billion in one-day liquidity to financial markets. The overnight repurchase-agreement operation took in $42.254 billion in Treasurys, $100 million in agency securities and $7.5 billion in mortgage-backed securities.
Last week, New York Fed leader John Williams told reporters the Fed is still trying to figure out how to deal with the market’s liquidity needs, which in turn affect short-term rates and the Fed’s ability to influence the cost of borrowing.
“We’re going to continue to learn through January, since we’re going to keep these repos going through some periods of, you know, various conditions, especially year-end stress. I think we’ll learn from that” and have new insights into whether a change is needed, or current plans will hold, Mr. Williams said.
Write to Michael S. Derby at michael.derby@wsj.com
