Fed Adds $63.5 Billion to Financial System in Repo Transaction - ABI

The Federal Reserve Bank of New York added $63.5 billion to the financial system yesterday, using the market for repurchase agreements, or repo, to relieve funding pressure in money markets, the Wall Street Journal reported. Banks asked for $63.5 billion in overnight reserves, all of which the Fed accepted, offering collateral in the form of U.S. Treasury and mortgage securities. In the repo market, borrowers seeking cash offer lenders collateral in the form of safe securities — frequently Treasury bonds — in exchange for a short-term loan. The term of these loans can be as short as overnight. The Fed began offering repo loans two weeks ago after a shortage of available cash in the financial system led repo rates to climb as financial companies scrambled for overnight funding. The actions marked the first time since the financial crisis that the Fed had taken such actions. ABI

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