Effective Thursday, January 30, 2014, the Federal Reserve Bank of New York (FRBNY) revised the terms of its daily, overnight fixed-rate reverse repurchase operational exercise, to increase the maximum allotment cap from $3 billion per counterparty per day to $5 billion per counterparty per day. In addition, the fixed rate for these auctions will continue to be between 0 and 5 basis points. The current fixed rate for the operations will be maintained at 3 basis points. Additionally, since January 15, the timing of the operations moved an hour and half later in the day, to 12:45 – 1:15 pm ( Eastern Time). All other terms of the exercise will remain the same.
Since 2009, the Open Market Trading Desk (the Desk) of the FRBNY has been working with market participants on operational aspects of tri-party reverse repurchase agreements (RRPs) to ensure that this tool will be ready to support the monetary policy objectives of the Federal Open Market Committee (Committee). The Committee also authorized the Desk to extend the conduct of a series of daily overnight, fixed-rate RRP operations through the end of January 2015. The operations will remain open to all eligible RRP counterparties, will use Treasury collateral, will settle same-day, and will have an overnight tenor.
The FRBNY is interested in running these exercises with larger transactional flows to view what effect such operations would have on interest rate control. The FRBNY has stated that this is only intended as an operational exercise as part of advance planning and is not intended to materially affect the current level of short-term interest rates.
You can see the latest FRBNY statement here.
Good Day. Good Exercise. TSR
This article is presented for informational purposes only and is not intended to constitute legal advice.
