Operating Policy
Statement to Revise Terms of Overnight Fixed-Rate Reverse Repurchase Agreement Operational Exercise
January 29, 2014

As noted in the October 19, 2009, Statement Regarding Reverse Repurchase Agreements, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York (New York Fed) has been working internally and with market participants on operational aspects of tri-party reverse repurchase agreements (RRPs) to ensure that this tool will be ready to support the monetary policy objectives of the Federal Open Market Committee (Committee). RRPs are a tool that can be used for managing money market interest rates, and are expected to provide the Federal Reserve with greater control over short-term rates. 

In further support of this goal, the Committee has authorized the Desk to continue the exercise established in September 2013 of offering daily overnight RRPs and to modify the terms.  Specifically, the authorization to conduct this exercise was extended one year, through January 30, 2015. Effective with the operation to be announced tomorrow, Thursday, January 30, 2014, the maximum allotment cap will be increased to $5 billion per counterparty per day from its current level of $3 billion per counterparty per day. It is expected that, over the coming months, the maximum allotment cap may be increased further. 

The fixed rate for these auctions continues to be authorized between 0 and 5 basis points. The current fixed rate for the operations will be maintained at 0.03 percent (three basis points). All other terms of the operations will remain the same. The operations will remain open to all eligible RRP counterparties, will use Treasury collateral, will settle same-day, and will have an overnight tenor.  The RRP operations will continue to be held from 12:45 pm to 1:15 pm (Eastern Time). 

Future changes to the maximum bid amount and rate for these RRP operations, or any other key parameter, will be announced with at least one business day prior notice on the New York Fed’s website. 

Like earlier operational readiness exercises, this work is a matter of prudent advance planning by the Federal Reserve. These operations do not represent a change in the stance of monetary policy, and no inference should be drawn about the timing of any change in the stance of monetary policy in the future. 

The results of these operations will be posted on the public website of the New York Fed, together with the results for other temporary open market operations. The outstanding amounts of RRPs are reported as a factor absorbing reserves in Table 1 in the Federal Reserve's H.4.1 statistical release, their remaining maturity is reported in table 2 of that release, and they are reported as liability items in Tables 8 and 9 of that release.

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