The Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York 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 (FOMC).
The Federal Reserve continues to enhance operational readiness and increase its understanding of the impact of RRPs through technical exercises. In further support of its objectives, the FOMC instructed the Desk to examine how term RRP operations might work as an additional supplementary tool to help control the federal funds rate. In support of this goal, the FOMC instructed the Desk to conduct a series of term RRP operations in February and early March, and to conduct a series of term RRP operations that span the March 2015 quarter-end.
Term RRP Operations in February and March
The FOMC instructed the Desk to conduct a series of term RRP operations from mid-February through early March. These operations will mature no later than March 12, will be open to all eligible RRP counterparties, and will use Treasury collateral. These term RRP operations will be subject to an overall size limit outstanding at any one time of up to $50 billion. This limit is in addition to the limit on overnight reverse repurchase agreements, which remain subject to a separate overall size limit of $300 billion per day. The first of these term RRP operations is anticipated to be approximately $10 billion and to take place on or around February 12. The Desk will release further information about these operations on or around February 5.
Term RRP Operations Over the March Quarter-End
The FOMC also instructed the Desk to conduct term RRP operations that cross the March 2015 quarter-end. The operations will mature on several dates in early April. The operations will be open to all eligible RRP counterparties and will use Treasury collateral. The Desk intends to offer the operations via auction at various times in late March. These term RRP operations will be subject to an overall size limit of $200 billion. This limit is in addition to the limit on overnight reverse repurchase agreements, which remain subject to a separate overall size limit of $300 billion per day. The Desk will release further information about these term RRP operations on or around March 2.
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.
