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In Echo of 2008, Fed Pledges $1.5 Trillion Injection to Aid Reeling Markets
The pumping of trillions of dollars of fresh liquidity into the financial system recalled the central bank’s unprecedented efforts during the last crisis.
U.S. central bankers pledged Thursday to inject some $1.5 trillion into the financial system in an effort to calm panicky markets after the spreading coronavirus triggered steep price declines on everything from stocks to bitcoin.
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The move by the Federal Reserve Bank of New York comes as investors in traditional Wall Street markets have rushed to snap up U.S. Treasury bonds, historically viewed as a “safe haven” asset in times of turmoil. The flight to safety has pushed down the 10-year note’s yield, which moves in the opposite direction from its price, to historically low levels below 1 percent.
“These changes are being made to address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak,” the New York Fed said in a statement on its website.
The announcement follows announcements by the Fed branch earlier in the week that it would increase the maximum amount of overnight loans provided to Wall Street bond dealers through “repo” markets — essentially short-term collateralized loans — to $175 billion from $100 billion.
The pumping of trillions of dollars of fresh liquidity into the financial system recalled the Federal Reserve’s unprecedented efforts during the crisis of 2008 and the years afterward to ply banks and markets with money in a bid to revive the economy in the wake of Lehman Brothers’ bankruptcy.
The New York Fed said Thursday it would initiate the injections as soon as Thursday afternoon, beginning with $500 billion of three-month repo loans.
On Friday, the bank will offer additional repo operations with $500 billion of three-month loans and $500 billion of one-month loans.
“Three-month and one-month repo operations for $500 billion will be offered on a weekly basis for the remainder of the monthly schedule,” according to the statement. “The Desk will continue to offer at least $175 billion in daily overnight repo operations and at least $45 billion in two-week term repo operations twice per week over this period.”
Bradley Keoun
Bradley Keoun is CoinDesk's managing editor of tech & protocols, where he oversees a team of reporters covering blockchain technology, and previously ran the global crypto markets team. A two-time Loeb Awards finalist, he previously was chief global finance and economic correspondent for TheStreet and before that worked as an editor and reporter for Bloomberg News in New York and Mexico City, reporting on Wall Street, emerging markets and the energy industry. He started out as a police-beat reporter for the Gainesville Sun in Florida and later worked as a general-assignment reporter for the Chicago Tribune. Originally from Fort Wayne, Indiana, he double-majored in electrical engineering and classical studies as an undergraduate at Duke University and later obtained a master's in journalism from the University of Florida. He is currently based in Austin, Texas, and in his spare time plays guitar, sings in a choir and hikes in the Texas Hill Country. He owns less than $1,000 each of several cryptocurrencies.
