March 16, 2020 / 4:31 PM / 23 days ago

U.S. overnight repo rate jumps, Fed announces new liquidity operation

(Reuters) - The cost of borrowing in the overnight repurchase agreement (repo) market jumped as high as 2% on Monday in volatile trading, before the New York Federal Reserve said it would offer a second overnight repo operation.

The Fed said it would add an additional operation of up to $500 billion at 1:30 p.m. eastern on Monday. The added support is meant to “ensure that the supply of reserves remain ample and to support the smooth functioning of short-term U.S. dollar funding market,” it said.

The cost of the overnight repo loans fell back to 1% after the Fed statement.

Reporting By Karen Brettell

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