Fed announces $60B in monthly Treasury bill buying program

Fed unveils post-crisis rules for domestic foreign lenders

Fed unveils post-crisis rules for domestic foreign lenders

Overnight repo operations will occur daily, initially at an offering amount of at least $75B per operation. It is hoped that the purchases, which swap reserves for Treasury bills, will relieve stress in the bank funding market.

The Committee also directs the Desk to conduct term and overnight repurchase agreement operations at least through January of next year to ensure that the supply of reserves remains ample even during periods of sharp increases in non-reserve liabilities, and to mitigate the risk of money market pressures that could adversely affect policy implementation.

The statement emphasizes that this isn't a change in the monetary policy stance. According to the Bloomberg report, the Fed said the bill purchases would aim to maintain bank reserves in the system at or above the level that prevailed in early September 2019.

Federal Reserve Chairman Jerome Powell revealed that the central bank will be expanding the size of its US$ 4 trillion balance sheet through further short-term T-bill purchases.

It's a message that Powell, Dallas Fed President Robert Kaplan and other policymakers have reiterated since the policy was foreshadowed earlier in the week: This is not quantitative easing.

Markets for the most part agreed.

The 10-year Treasury falls, pushing yield up nearly 7 basis points to 1.74%; (TLT -1.3%), (TBT +2.6%).

The outlines of the trade deal were announced while Kaplan was giving his talk.

Across maturities, yields dipped modestly, but remained up between 5 and 10 basis points on the day.

"We have to figure out what is the right growth rate of our balance sheet that is not about stimulating the economy, that is just about making sure there is enough liquidity in the system", he said.

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