The Federal Reserve added $600 million in reserves to the banking system when it arranged repurchase agreements as part of a program to test its operational readiness.
The three-day transactions, part of a series of open-market operations that began in 2009, don’t represent any change in monetary policy, according to an Aug. 2 statement on the Federal Reserve Bank of New York’s website. Treasury, mortgage-backed and agency collateral was accepted.
In repos, the Fed buys securities from its 21 primary dealers for a set period, raising the amount of money available in the banking system temporarily. At maturity, the securities are returned to the dealers, and the cash to the Fed. In a reverse repo, the opposite occurs.
The Federal Open Market Committee authorized the New York Fed in June to undertake repos and outright purchases and sales of securities, in addition to reverse repos, to test readiness. The repo conducted Aug. 3 was the first by the central bank since December 2008.