INSTANT VIEW: U.S. Federal Reserve sets new liquidity measures

NEW YORK (Reuters) - The Federal Reserve on Wednesday said it was extending a credit facility that it provides for primary dealers in one of several steps to boost liquidity in stressed financial markets.

KEY POINTS:

* The U.S. central bank said its Primary Dealer Credit Facility (PDCF) and its Term Securities Lending Facility (TSLF) will be extended through January 30.

* It also said that it will introduce 84-day Term Auction Facility (TAF) loans, which it said will complement its existing 28-day TAF loans.

* The Fed introduced the loans program to try to ease a credit crunch that policy-makers feel has shown only limited signs of easing.

COMMENTS:

ORLANDO GREEN, INTEREST RATE STRATEGIST, CALYON, LONDON:

"This will help ease some of the liquidity fears as we head into the month of August. Of course this time last year, we were heading into the month that saw the spike up in risk aversion and liquidity (problems) that pretty much started the crisis in the financial market. I don't think it's a surprise necessarily, but it's still nonetheless encouraging."

LUCA JELLINEK, RATES STRATEGIST, ABN AMRO, LONDON:

"There is an immediate, almost certainly unintentional, risk-premium wobble due to this reminder that the financial system remains 'fragile'. This should help contain financing basis spreads out to the longer, 3-month term. Net of other effects, this could create some tightening pressure in ASW (especially with the rapidly mounting supply of Treasuries, as per the quarterly refinancing announcement).

"Critically, the existence (of extended-size, extended-term) swap lines to the ECB/SNB means that the impact should be systemic, rather than limited to the US$ market. Just to be clear, we're not looking for global term-/calculation-basis/FX swap basis spreads to come screeching in tighter. Rather, this measure is probably aimed at preventing them from widening further over the August anniversary of the liquidity meltdown."

SEAN MALONEY, FIXED INCOME STRATEGIST, NOMURA, LONDON: