NY Fed to begin reverse repo tests
03 August 2010 New York
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As noted in the October 19, 2009 Statement Regarding Reverse Repurchase Agreements, the Federal Reserve Bank of New York (New York Fed) has been working internally and with market participants on operational aspects of triparty reverse repurchase agreements to ensure that this tool will be ready if the Federal Open Market Committee decides it should be used. In the November 30, 2009 statement, the New York Fed announced a series of small-scale, real-value transactions with primary dealers using U.S. Treasury and direct agency debt securities from the System Open Market Account (SOMA) portfolio as collateral.
Beginning tomorrow, the New York Fed intends to conduct a similar series of small-scale, real-value reverse repurchase transactions with primary dealers using all eligible collateral types, including, for the first time, agency mortgage-backed securities (MBS) from the SOMA portfolio. Of note, in contrast to the SOMA holdings of U.S. Treasury and direct agency debt securities which are maintained in an account at the New York Fed, the SOMA holdings of agency MBS securities are currently maintained at a custodian. As a result, certain operational and legal arrangements for transactions involving agency MBS collateral differ from those in place for transactions involving U.S. Treasury and direct agency debt securities as collateral.
Like the earlier operational readiness exercises, this work is a matter of prudent advance planning by the Federal Reserve. It does not represent any change in the stance of monetary policy, and no inference should be drawn about the timing of any change in the stance of monetary policy in the future.
These forthcoming operations are being conducted to ensure operational readiness at the Federal Reserve, the triparty repo clearing banks, and the primary dealers. The operations have been designed to have no material impact on the availability of reserves or on market rates. Specifically, the aggregate amount of outstanding transactions will be very small relative to the level of excess reserves, and the transactions will be conducted at current market rates.
The results of these operations will be posted on the Federal Reserve Bank of New York's public website where all temporary open market operation results are posted. The outstanding amounts of reverse repos are reported as a liability item in tables 1, 10, and 11 in the Federal Reserve System's H.4.1 statistical release.
Beginning tomorrow, the New York Fed intends to conduct a similar series of small-scale, real-value reverse repurchase transactions with primary dealers using all eligible collateral types, including, for the first time, agency mortgage-backed securities (MBS) from the SOMA portfolio. Of note, in contrast to the SOMA holdings of U.S. Treasury and direct agency debt securities which are maintained in an account at the New York Fed, the SOMA holdings of agency MBS securities are currently maintained at a custodian. As a result, certain operational and legal arrangements for transactions involving agency MBS collateral differ from those in place for transactions involving U.S. Treasury and direct agency debt securities as collateral.
Like the earlier operational readiness exercises, this work is a matter of prudent advance planning by the Federal Reserve. It does not represent any change in the stance of monetary policy, and no inference should be drawn about the timing of any change in the stance of monetary policy in the future.
These forthcoming operations are being conducted to ensure operational readiness at the Federal Reserve, the triparty repo clearing banks, and the primary dealers. The operations have been designed to have no material impact on the availability of reserves or on market rates. Specifically, the aggregate amount of outstanding transactions will be very small relative to the level of excess reserves, and the transactions will be conducted at current market rates.
The results of these operations will be posted on the Federal Reserve Bank of New York's public website where all temporary open market operation results are posted. The outstanding amounts of reverse repos are reported as a liability item in tables 1, 10, and 11 in the Federal Reserve System's H.4.1 statistical release.
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