NY Fed Buys $180m Reverse Repo MBS

The New York Federal Reserve Bank bought $180m of tri-party reverse repurchase agreements today as part of what it calls an “operational readiness” program. It’s the first transaction geared to test the reverse repo tool, in case the Federal Market Open Committee decides it should be used as part of the Fed’s broader exit strategy from mortgage-backed securities (MBS). As HousingWire previously reported, tri-party reverse repurchase agreements are typically overnight sell and buyback deals with set interest rates. The term “tri-party” references the presence of a third party arbitrator. The New York Fed said Tuesday it intends to conduct a series of small-scale, real-value reverse repurchase transactions with primary dealers using all eligible collateral types, including, for the first time, agency MBS in the System Open Market Account (SOMA) portfolio. “These forthcoming operations are being conducted to ensure operational readiness at the Federal Reserve, the tri-party repo clearing banks, and the primary dealers,” the New York Fed said. “The operations have been designed to have no material impact on the availability of reserves or on market rates. Specifically, the aggregate amount of outstanding transactions will be very small relative to the level of excess reserves, and the transactions will be conducted at current market rates.” Write to Diana Golobay.

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