Fed Again Takes Steps to Boost Market Liquidity

WASHINGTON (Reuters) – The U.S. Federal Reserve said on Tuesday thatwith pressure mounting again in financial markets, it was expanding asecurities lending program and will accept a broader range ofsecurities as collateral.

"Under this new Term Securities Lending Facility (TSLF), the FederalReserve will lend up to $200 billion of Treasury securities to primarydealers secured for a term of 28 days…by a pledge of othersecurities, including federal agency debt, federal agencyresidential-mortgage-backed securities (MBS), and non-agencyAAA/Aaa-rated private-label residential MBS," the Fed said in astatement.

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

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

The Fed said it was cooperating with other central banks, includingthe Bank of Canada, Bank of England, European Central Bank and theSwiss National Bank on steps to deal with pressures in global financialmarkets.

It announced that its policy-setting Federal Open Market Committeehas authorized increases in existing swap lines with the EuropeanCentral Bank and the Swiss National Bank.

(Reporting by Glenn Somerville, Editing by Chizu Nomiyama)


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