The Federal Reserve Bank of New York said it will begin tomorrow a third series of “small-value” repurchase agreements using all eligible collateral types as part of readiness testing of its operational tools.
The open-market operations don’t represent any change in monetary policy, the New York Fed said in a statement today. The Federal Open Market Committee previously 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. The Fed did a round of repo testing last year in August and again in January.
Prior to the transaction in August, the New York Fed hadn’t conducted a repo since Dec. 30, 2008. 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.
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