The Federal Reserve Bank of New York added $72.8 billion in temporary liquidity to financial markets Friday.<\/p>\n
The intervention came via\u00a0three-day repurchase agreements<\/a>, or repos. The Fed took all the securities offered to it by eligible banks. Fed repo interventions take in Treasury and mortgage securities from eligible banks in what is effectively a short-term loan of central-bank cash, collateralized by the securities.<\/p>\n The Fed\u2019s money-market operations are aimed at ensuring that the financial system has enough liquidity and that short-term borrowing rates are stable and consistent with Fed goals, with the central bank\u2019s federal-funds rate staying within the 1.5%-to-1.75% target range.\u00a0The effective fed-funds rate<\/a>\u00a0stood at 1.55% on Thursday. The broad general collateral rate for repo trading stood at 1.52%, also for Thursday.<\/p>\n The Fed has been intervening in markets in the current fashion since mid-September, when\u00a0short-term rates unexpectedly shot up<\/a>\u00a0on a confluence of factors, the biggest of which stemmed from corporate tax payments and the settlement of Treasury debt auctions. . The Fed has used similar operations for decades to manage short-term rates.<\/p>\n Since the large interventions started, money-market rates have calmed down. The Fed is using temporary operations to tamp down any possible wild moves, while purchasing Treasury bills to build up reserves in the banking system. It hopes that by buying Treasury bills, the central bank will be able to cut back on repo interventions at the start of next year.<\/p>\n The Fed also bought $7.5 billion in Treasury bills on Friday. Eligible banks offered the Fed $23.17 billion.<\/p>\n The central bank currently expects to buy Treasury bills through the middle of next year.<\/p>\n