The European Central Bank, the Bank of England, the U.S. Federal Reserve and the Swiss National Bank have, through their reciprocal currency agreements, have decided to provide further U.S. liquidity in a one week refi operation. The purpose of this operation is to address and ease funding pressures in the financial markets over the end of the quarter.
"Central banks continue to work together closely and are prepared to take further steps as needed to address the ongoing pressures in funding markets," the ECB said in a press release published on Friday.
The press release also outlined that the ECB would provide $35 billion in variable rate tender against Euro-system-eligible collateral over the quarter end. "During the week, the overnight operations will be USD 30 billion," the press release added.
According to a BOE report, the UK central bank will allot $30 billion in an one week lending operation on Friday, in addition to overnight lending operations.
"In addition, the Bank's long-term repo operations against extended collateral, including mortgage securities, will for a period be held weekly and enlarged," the BOE report added. The first such operation will be held on Monday 29 September. It will be an auction for £40bn, for maturity to Thursday 15 January 2009.
In a press release published on the Federal Reserve's website on Friday, the U.S. central bank revealed that it had authorized a $10 billion increase in its temporary swap facility with the ECB, and a $3 billion increase with the SNB. "These expanded facilities will now support the provision of U.S. dollar liquidity in amounts of up to $120 billion by the ECB and up to $30 billion by the Swiss National Bank," the U.S. report said.
By Todd Wailoo
©CEP News Ltd. 2008