Fed to Widen Treasury Buying, Expand Repo to Ease Market Strain

(Bloomberg) — The Federal Reserve took aggressive steps Thursday to ease what it called “temporary disruptions” in Treasury financing markets, flooding the market with liquidity and widening its purchases of U.S. government securities in a measure that recalls the quantitative easing it used during the financial crisis.

The Federal Reserve Bank of New York said in a statement that the moves were “to address temporary disruptions in Treasury financing markets” at the direction of Fed Chairman Jerome Powell in consultation with the Federal Open Market Committee.

U.S. stocks trimmed staggering losses of more than 8% earlier in the day as investors absorbed the Fed’s muscular decision.

The buying will include coupon-bearing notes and match the maturity composition of the Treasury market, it said. Ten-year U.S. Treasury yields fell sharply to trade around 0.68%.

“The Treasury securities operation schedule includes a change in the maturity composition of purchases to support functioning in the market for U.S. Treasury securities,” the New York Fed said.

Term repo operations in large size have also been added to help markets function, it also said. The New York Fed said it would offer $500 billion in a three-month repo operation at 1:30 p.m. and repeat the exercise tomorrow, along with another $500 billion in a one-month operation, and continue on a weekly basis for the rest of the monthly calendar.

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