Repo Madness Day 8: NY Fed Pumps $110 Billion of Cash into Market

The New York Federal Reserve Bank's emergency interventions on money markets came as a sudden cash crunch drove up the cost of borrowing the money that banks need to replenish the reserves they hold at the central bank
© AFP/File Eva HAMBACH

The Federal Reserve Bank of New York added $110 billion of cash to the financial system Thursday, the eighth consecutive business day of Fed support for the market for overnight repurchase agreements, or repos.

The N.Y. Fed added $50.1 billion of overnight cash, swapping dollars for $34.55 billion of Treasuries and $15.55 billion of mortgage-backed securities. That was half of the $100 billion of securities the Fed said it would accept.

The Fed also offered two-week repos on Thursday. In these operations, the Fed provides cash in exchange for securities and holds them for two-weeks. The Fed said it accepted $37.55 billion of Treasuries but received requests to take $43 billion. It took $24.25 billion of mortgage-backed securities with bids for $29.25 billion.

The Fed’s repo operations are highly unusual. The Fed launched them after short-term repo rates spiked to nearly 10 percent last week as financial firms sought short-term funding. Stress–and Fed intervention–is expected to continue through the end of the year although the current Fed program officially expires on October 10.

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