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New York Fed to conduct $75B overnight repo operations until Oct. 10

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New York Fed to conduct $75B overnight repo operations until Oct. 10

The Federal Reserve Bank of New York will conduct overnight repurchase agreement operations up until Oct. 10, with each operation purchasing $75 billion or more.

In addition, the New York Fed will conduct three 14-day term repo operations amounting to at least $30 billion each on Sept. 24, Sept. 26 and Sept. 27.

The operations will follow a series of smaller repo operations during the week of Sept. 16. The central bank conducted $53.15 billion in purchases Sept. 17 to address a liquidity crunch in repo markets, which resulted in interest rates sharply jumping over the federal funds rate. The secured overnight financing rate, which is calculated based on borrowing cash collateralized by U.S. Treasurys, saw heightened volatility and jumped to its highest point of 5.25%.

Sofr stood at 1.95% on Sept. 19, according to published data from the New York Fed.

The Federal Reserve in its September meeting lowered the rate for its overnight repurchase facility rate to 1.70%, below the fed funds rate of 1.75% to 2.00%, and it cut the interest on excess reserves rate by 30 basis points to 1.80% in response to the rate volatility. Chairman Jerome Powell said the liquidity crunch is due to temporary factors, such as pending corporate tax bill payments and a larger-than-usual issuance of Treasurys.