Federal Reserve, central banks announce operations to address funding pressures over quarter end

federalreserve.gov ^ | September 26, 2008 | Federal Reserve

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For release at 2:00 a.m. EDT

Central banks have been employing coordinated measures designed to address the pressures in global money markets. Most recently, central banks have acted together to inject dollars into the overnight markets. Using their reciprocal currency arrangements (swap lines) with the Federal Reserve, the Bank of England, the European Central Bank (ECB), and the Swiss National Bank today are announcing the introduction of operations to provide U.S. dollar liquidity with a one-week maturity. These operations are designed to address funding pressures over quarter end. Central banks continue to work together closely and are prepared to take further steps as needed to address the ongoing pressures in funding markets.

Federal Reserve Actions

To assist in the expansion of these operations, the Federal Open Market Committee has authorized a $10 billion increase in its temporary swap facility with the ECB and a $3 billion increase in its facility with the Swiss National Bank. These expanded facilities will now support the provision of U.S. dollar liquidity in amounts of up to $120 billion by the ECB and up to $30 billion by the Swiss National Bank.

In sum, these changes represent a $13 billion addition to the $277 billion previously authorized temporary reciprocal currency arrangements with other central banks. In addition to the swap lines with ECB and the Swiss National Bank, temporary swap lines previously have been authorized with: the Bank of Japan ($60 billion), the Bank of England ($40 billion), the Reserve Bank of Australia ($10 billion), the Bank of Canada ($10 billion), the Bank of Sweden ($10 billion), the National Bank of Denmark ($5 billion), and the Bank of Norway ($5 billion).

These arrangements have been authorized through January 30, 2009.

Information on Related Actions Being Taken by Other Central Banks Information on the actions that will be taken by the other central banks is available at the following websites:

Bank of England

European Central Bank

Swiss National Bank

[Tublecane]

The day a central bank wants to take money out of the market is the day I’ll crap strawberries.

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Bank of England -

The Bank of England will increase the term of its existing operations to lend US dollar funds against collateral eligible in the Bank’s short-term repos and US Treasuries. An operation to lend $30bn of funds for one week will take place today, alongside an operation to lend funds overnight. The size of the Bank’s overnight dollar repo operation will be $10bn today.

Bank of England action

In addition, the Bank’s long-term repo operations against extended collateral, including mortgage securities, will for a period be held weekly and enlarged. The first such operation will be held on Monday 29 September. It will be an auction for £40bn, for maturity to Thursday 15 January 2009. Consistent with the Bank's objective of keeping overnight market interest rates in line with Bank Rate, the Bank intends to offset the additional reserves taken up in the long-term repo operations in its other operations, if necessary by draining reserves.

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European Central Bank -

The Governing Council of the ECB decided to provide US dollar one week funding over the quarter end to Eurosystem counterparties against Eurosystem-eligible collateral, applying a variable rate tender procedure and with an intended volume of USD 35 billion. During this week the overnight operations will be USD 30 billion. The operational details can be obtained from the ECB's website (www.ecb.europa.eu).

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Swiss National Bank -

With today’s value date, the SNB will hold a US dollar repo auction with a term of 7 days for an amount of up to USD 9 billion. In so doing, it is providing its counterparties with additional US dollar liquidity over quarter end. At the same time, the SNB will temporarily reduce the maximum volume of the US dollar repo auctions with a term of 1 day (overnight) from USD 10 billion to USD 7 billion.

[truthkeeper]

bttt