‘Cheap’ End-of-Year Funding Fuels Demand for Fed Repo Operation
- Bidding for 42-day action almost twice as large as offering
- Fed has increased maximum offering for the next similar action
The Marriner S. Eccles Federal Reserve building in Washington.
Photographer: Andrew Harrer/BloombergMarket participants leaped at the opportunity to lock in end-of year funding at Monday’s Federal Reserve repurchase-agreement operation, the first to be conducted with a 2020 maturity. The central bank boosted the size of its next operation in the wake of the result.
Even with concern about liquidity having eased since September’s upheaval, the Federal Reserve Bank of New York’s Monday operation to inject cash into the financial system for 42 days attracted $49 billion in bids -- almost twice the $25 billion available. This was the first of three term operations to provide funding past Dec. 31, with the bank planning another 42-day action on Dec. 2 and a 28-day offering on Dec. 9.