The U.S. central bank on Wednesday said it extended several measures aimed at enhancing liquidity in the credit markets.
The Federal Reserve moves included the introduction of longer terms to maturity in its term auction facility. Also, the Fed said it will extend the primary dealer credit facility and term securities lending facility through Jan. 30, 2009 "in light of continued fragile circumstances in financial markets."
Beginning on Aug. 11, the Fed will auction 84-day TAF loans while continuing to auction 28-day TAF funds. Specifically, the Fed will conduct biweekly TAF auctions, alternating between auctions of $75 billion of 28-day credit and auctions of $25 billion of 84-day credit.
Currently, the Fed auctions $75 billion of 28-day funds every two weeks. During a transition period, the amount of 28-day credit being auctioned will be reduced to keep the amount of TAF credit outstanding at $150 billion.
Simultaneously, the European Central Bank (ECB) and the Swiss National Bank (SNB) said they will make 84-day funds, as well as 28-day funds, available at their dollar auctions. The Fed's Federal Open Market Committee has authorized an increase in its dollar swap line with the ECB to $55 billion from $50 billion in order to accommodate a temporary increase in the ECBs dollar auctions as the ECB shifts some of its auctions to 84-day terms. The size of the SNBs swap line remains at $12 billion. These swap lines are authorized through Jan. 30, 2009.
