Source: FT.com
The Federal Reserve on Wednesday announced that it was extending two emergency lending facilities for banks until the end of January of next year.
Both had previously been scheduled to expire at the end of September, and the announcement means that the emergency measures will stay in place until after the next president takes office.
Markets responded positively to the move, which came before trading opened in New York, and the dollar strengthened on the news. While the moves had been expected, the timing – a week before the Federal Open Market Committee is due to meet on monetary policy – came as a surprise.
The Term Securities Lending Facility, which provides loans of Treasuries, and the Primary Dealer Credit Facility, which provides direct loans to securities firms, were both introduced in March at the same time as the Fed revealed special financing to allow the purchase of Bear Stearns by JPMorgan Chase.
“These pre-emptive moves underscore that the liquidity tensions are with us for a while yet,” said Ciaran O’Hagan, strategist at Société Générale.
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