US Fed to open temporary dollar repo facility for central banks
31 March 2020 New York
Image: Shutterstock
The US Federal Reserve is set to open a temporary repurchase agreement facility agreement for foreign and international monetary authorities (FIMA Repo Facility) to help support the smooth functioning of financial markets.
The programme, which begins 6 April and is to remain in place for six months, will allow participants to temporarily exchange US treasuries for dollars, which can then be made available to institutions in their jurisdictions.
The term of the agreement will be overnight but can be rolled over as needed, the Fed confirms.
The transaction would be conducted at an interest rate of 25 basis points over the rate on Interest on Excess Reserves (IOER), which generally exceeds private repo rates when the treasury market is functioning well.
The rate is set as such so that the facility would primarily be used only in unusual circumstances such as those prevailing at present.
Outstanding transaction totals will also be made public in the Fed’s weekly balance sheet report.
“This facility should help support the smooth functioning of the US treasury market by providing an alternative temporary source of US dollars other than sales of securities in the open market,” the Fed said in a statement.
The new facility will work alongside other recently launched liquidity facilities such as the dollar swap lines the Fed established with other central banks earlier this month, to help ease strains in global US dollar funding markets.
“The facility will also support local markets in US dollars and bolster broad market confidence,” the Fed notes.
The programme, which begins 6 April and is to remain in place for six months, will allow participants to temporarily exchange US treasuries for dollars, which can then be made available to institutions in their jurisdictions.
The term of the agreement will be overnight but can be rolled over as needed, the Fed confirms.
The transaction would be conducted at an interest rate of 25 basis points over the rate on Interest on Excess Reserves (IOER), which generally exceeds private repo rates when the treasury market is functioning well.
The rate is set as such so that the facility would primarily be used only in unusual circumstances such as those prevailing at present.
Outstanding transaction totals will also be made public in the Fed’s weekly balance sheet report.
“This facility should help support the smooth functioning of the US treasury market by providing an alternative temporary source of US dollars other than sales of securities in the open market,” the Fed said in a statement.
The new facility will work alongside other recently launched liquidity facilities such as the dollar swap lines the Fed established with other central banks earlier this month, to help ease strains in global US dollar funding markets.
“The facility will also support local markets in US dollars and bolster broad market confidence,” the Fed notes.
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