The Federal Reserve Bank of New York will extend its overnight repurchase operations through Nov. 4.
The New York Fed's trading desk will continue to purchase $75 billion or more in its overnight repo operations and also conduct eight separate term repo operations, with five of them for at least $35 billion and the remaining three for at least $45 billion.
The term repo operations will be conducted Oct. 8, Oct. 10, Oct. 11, Oct. 15, Oct. 17, Oct. 22, Oct. 24 and Oct. 29. These operations will either have a six-day maturity term, a 14-day maturity term or a 15-day maturity term.
The bank previously planned to conduct overnight repo operations until Oct. 10. It conducted term repo operations on Sept. 24, Sept. 26 and Sept. 27.
Fitch Ratings recently warned a prolonged repo market squeeze could worsen global liquidity issues and spill over to other asset classes. It also said the Federal Reserve could look to create a permanent standing facility if repo market volatility resurfaces.
Fed Chairman Jerome Powell said the question of growing the Fed's balance sheet once again to deal with repo market volatility is on the agenda for the upcoming October Federal Open Market Committee meeting. In a House hearing, Gov. Lael Brainard said reserves may have become more scarce than intended when the Fed previously trimmed its balance sheet and should consider growing it again to ensure an ample supply of reserves.
The repo market volatility has seen the secured overnight financing rate jumping over the federal funds rate, peaking at 5.25%. While Sofr has stayed within the fed funds range most of the time since the start of repo operations, it jumped over the range of 1.75% to 2.00% on Sept. 25 and Sept. 30, based on data from the New York Fed.
