The April FOMC minutes suggest the Fed is planning a new standing repo facility (“SRF”), which would be the Fed’s third SRF. The contours of the new SRF are still up in the air, but we can infer them from a stated desire to backstop Treasury repo and the coverage gaps of the other SRFs. The Fed currently operates each day a de facto SRF for primary dealers and another for foreign central banks. This leaves non-primary dealers and investment funds as the obvious candidates for a new facility, as the two are the remaining active participants in Treasury repo. In this post we describe what a SRF is, how the current SRFs operate, and suggest that a new SRF would have a very limited market impact.

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