Central Banks and The Fed Liquidity Moves

The Federal Reserve (The Fed) announced on March 11 additional “coordinated actions” with the central banks of several other G-10 countries to add liquidity to the troubled credit and financial markets in the U.S. and abroad. “Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank are announcing specific measures.”

To enhance a $200 billion program The Fed announced on March 7, which includes increasing the size of its Term Auction Facility to $100 billion, lengthening the term, and accepting broader types of collateral; and a $100 billion series of repurchase agreements, which inject liquidity into credit markets, The Fed on March 11 expanded a $200 billion “securities lending program” that will allow primary dealers to borrow Treasury securities for 28 days instead of the normal overnight term, collateralized by banks’ “pledge of other securities, including federal agency debt, federal agency residential-mortgage-backed securities (MBS), and non-agency AAA/Aaa-rated private-label residential MBS.”