Bloomberg News

New York Fed to Conduct Repo Transactions to Test Readiness

January 16, 2013

The Federal Reserve Bank of New York said it will conduct a series of “small-value” repurchase agreements using all eligible collateral types as part of readiness testing of its operational tools.

The open-market operations, which will begin in the “near future” and follow a series conducted in August 2012, don’t represent any change in monetary policy, the New York Fed said in a statement today. In June 2012, the Federal Open Market Committee authorized the New York Fed to undertake repos and outright purchases and sales of securities, in addition to reverse repos, for such testing, the New York Fed said.

Prior to the transaction in August, the New York Fed hadn’t conducted a repo since Dec. 30, 2008. Since 2008, the Fed has added six primary dealers, the firms that act as counterparties to the central bank. The New York Fed has 21 primary dealers.

In repos, the Fed buys U.S. Treasury, mortgage-backed and so-called agency debt from dealers for a set period, temporarily raising the amount of money available in the banking system. At maturity, the securities are returned to the dealers, and the cash to the Fed.

To contact the reporter on this story: Liz Capo McCormick in New York at emccormick7@bloomberg.net

To contact the editor responsible for this story: David Liedtka at dliedtka@bloomberg.net


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