Fed to pump more than $500 billion into short-term bank funding, expand types of security purchases
The Federal Reserve has stepped into financial markets for the second day in a row and the third time this week, this time dramatically ramping up asset purchases amid the turmoil created by the coronavirus.
"These changes are being made to address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak," the New York Fed said in a statement released early Thursday afternoon amid a washout on Wall Street that was heading toward the worst day since 1987.One part of the announcement saw the Fed widen the scale for its $60 billion worth of money Treasury purchases, which to now had been confined to short-term T-bills.
Under the new regime, the Fed will extend its purchases "across a range of maturities" to include bills, notes, Treasury Inflation-Protected Securities and other instruments. The central bank will begin purchasing coupon-bearing securities, something market participants have been clamoring for since late 2019.The second part of the new operations will see the New York Fed desk offer $500 billion in a three-month repo operation and a one-month operation.
In addition, the Fed will continue to offer at least $175 billion in overnight repos and $45 billion in two-week operations. The extraordinary moves come amid extreme market turmoil created by uncertainty over the coronavirus spread. Government bond yields earlier this week cascaded to record lows amid reports of liquidity issues in the market and fears of a global recession.for exclusive insights and analysis, and live business day programming from around the world.
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