Fed Again Takes Steps to Boost Market Liquidity

The Fed is expanding securities lending. 

WASHINGTON (Reuters) - The U.S. Federal Reserve said on Tuesday that with pressure mounting again in financial markets, it was expanding a securities lending program and will accept a broader range of securities as collateral.

"Under this new Term Securities Lending Facility (TSLF), the Federal Reserve will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days...by a 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," the Fed said in a statement.

The U.S. central bank said the purpose of its latest action was to "promote liquidity in the financing markets for Treasury and other collateral and thus to foster the function of financial markets more generally."

The new lending facility will operate through weekly auctions that will start on March 27, the Fed said. It said it still was consulting primary dealers regarding the specific design of an auction.

The Fed said it was cooperating with other central banks, including the Bank of Canada, Bank of England, European Central Bank and the Swiss National Bank on steps to deal with pressures in global financial markets.

It announced that its policy-setting Federal Open Market Committee has authorized increases in existing swap lines with the European Central Bank and the Swiss National Bank.

(Reporting by Glenn Somerville, Editing by Chizu Nomiyama)