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Detailed explanation of the Federal Reserve's Repo Program (SRF)
1. Basic concepts and operating mechanisms
**Standing Repo Facility (SRF)** is a key monetary policy tool established by the Federal Reserve in July 2021, aimed at providing a 'safety net' of liquidity to the money market, preventing short-term interest rates from soaring above the target range.
Core operating mechanism:
- The Federal Reserve purchases securities (Treasuries, agency bonds, or MBS) from eligible counterparties, agreeing to sell them back the next day at a slightly higher price
- Essentially provides collateralized short-term loans, temporarily increasing the reserves of the banking system
- Trading period: mainly overnight, but can be extended based on weekends/holidays
**Standing Repo Facility (SRF)** is a key monetary policy tool established by the Federal Reserve in July 2021, aimed at providing a 'safety net' of liquidity to the money market, preventing short-term interest rates from soaring above the target range.
Core operating mechanism:
- The Federal Reserve purchases securities (Treasuries, agency bonds, or MBS) from eligible counterparties, agreeing to sell them back the next day at a slightly higher price
- Essentially provides collateralized short-term loans, temporarily increasing the reserves of the banking system
- Trading period: mainly overnight, but can be extended based on weekends/holidays
Disclaimer: Includes third-party opinions. No financial advice. May include sponsored content. See T&Cs.
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