The Fed pumps another $75 billion into financial markets, continuing capital-injection plan

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Reuters / Chris Wattie

  • The Federal Reserve on Wednesday sold another $75 billion in market repurchase agreements, or repos, in a continued effort to calm money markets and bring interest rates within its intended range.
  • The round was oversubscribed, signaling strong demand for the asset as banks requested nearly $92 billion in overnight repos.
  • The bank began a streak of repo offerings last week, marking the first time such assets were sold since the 2008 financial crisis. The central bank said the offerings would continue through early October.
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The Federal Reserve continued its effort to stabilize money markets and contain interest rates on Wednesday with another $75 billion sale of overnight repurchase agreements, or repos.

The sale was oversubscribed as banks sought about $92 billion in overnight repos, indicating rising demand for the asset. Banks offered Treasurys and mortgage-backed securities as collateral.

The offering follows a $105 billion injection on Monday, which included $75 billion in overnight repos and $30 billion of repos expiring in 14 days.

The Fed began offering repos last week for the first in a decade to calm money markets and to bring short-term borrowing rates within its target range. The central bank pumped a total of $278 billion into the financial system between Tuesday and Friday last week.

Also last week, the Federal Open Market Committee cut its benchmark interest rate by a quarter of a percentage point, landing in a window of 1.75% to 2%. Fed Chairman Jerome Powell called the repo offerings a temporary action.

The Fed’s schedule calls for another $75 billion of overnight repos to be auctioned every business day until October 10, with some days also offering $30 billion worth of 14-day repos.

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