Fed establishing a Money Market Mutual Fund Liquidity Facility (MMLF)

  • will create money market mutual fund liquidity facility to lend to financial institutions secured by high quality assets purchased by those institutions from money market mutual funds
  • facility will help meet demands for redemptions by households and other investors to enhance credit provision throughout the economy
  • program includes $10 bln of credit protection from US Treasury exchange stabilization fund
  • program to be run through Boston fed, will make loans up to 12 months
  • will accepted collateral includes US Treasuries, GSE securities, asset-backed commercial paper rated a1/f1/p1 and unsecured CP rated no lower than a1/f1/p1
  • rates on loans will be primary credit rate for treasuries and GSE collateral and primary rate plus 100 bps for other collateral types

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A supportive move from the Fed - further support for liquidity.