The Fed to inject billions of dollars into financial markets

The Federal Reserve has said it will inject trillions of dollars into the financial system in dramatic response to signs of strain on short-term funding and the US Treasury markets.

The US central bank is also modifying its treasury bill purchasing program to “promote the proper functioning of the treasury market.”

For the third time in four days, the New York branch of the Fed on Thursday said it would increase the size of its loans in the repo market, where investors borrow money in return for high-quality collateral like Treasury bills – this time by multiples of the amounts previously proposed.

The Fed will now offer at least $ 500 billion (€ 447 billion) in three-month loans, as of now, with an additional $ 500 billion in three-month loans on Friday. He said he would also provide a $ 500 billion month-long loan on Friday that would settle on the same day.

Three-month loans

Starting next week, the Fed announced that it will offer three-month loans for $ 500 billion and one-month loans for $ 500 billion on a weekly basis until April 13.

He said he would change the mix of its outstanding $ 60 billion treasury purchases for the month of March, to “roughly match the maturities of outstanding treasury securities,” responding to calls from the government. traders concerned about deteriorating liquidity conditions.

The compositional changes “are being made to deal with the very unusual disruptions in Treasury funding markets associated with the coronavirus epidemic,” the statement said. “Reserve management purchases in the second quarter will continue to be made with this maturity allocation. The conditions of operations will be adjusted if necessary to promote the proper functioning of the treasury market and the effective and efficient implementation of policies. “- Copyright The Financial Times Limited 2020