The focus contained in the annual report of the Bank of Italy with the actions of central banks in the USA, UK, Japan and in emerging countries
The Federal Reserve.
The Federal Reserve has:
(a) lowered the target range of federal funds rates by 150 basis points (to 0.00-0.25 per cent);
(b) increased the supply of liquidity to counterparties through daily and weekly repurchase agreements ($ 500 and $ 1,000 billion, respectively);
(c) reduced the cost associated with the use of the discount window and zeroed the compulsory reserve ratio;
(d) created the Primary Dealer Credit Facility, to provide counterparties with loans guaranteed by a wide range of financial assets, such as mortgage-backed securities, asset-backed securities (ABS), corporate bonds and commercial paper.
The US central bank has also implemented interventions aimed at guaranteeing the liquidity of specific markets and encouraging access to credit by households and businesses, against a partial hedging of credit risk with Treasury funds.
To support liquidity in the money market, the Federal Reserve intervened both directly, through the purchase of commercial paper (Commercial Paper Funding Facility), and indirectly, by providing counterparties with loans guaranteed by securities purchased by them from money market mutual funds (Money Market Mutual Fund Liquidity Facility, MMLF).
In support of the liquidity of the local administrations, a specific instrument (Municipal Liquidity Facility) was created to directly finance, for the first time in history, the issuance of short-term debt of states, cities and counties, for a total amount of 500 billion dollars.
The Federal Reserve has also set up a series of facilities to facilitate medium-term credit to families and businesses more directly, for a total amount of 1,800 billion dollars. Of these, 100 billion are aimed at financing newly issued ABS having different forms of credit as underlying assets, including commercial, student and consumer credit (Term Asset-Backed Securities Loan Facility).
Larger companies can benefit from purchases by the Federal Reserve of syndicated issuance loans and corporate bonds on the primary and secondary markets for a total amount of up to $ 750 billion (Primary Market Corporate Credit Facility and Secondary Market Corporate Credit Facility).
The possibility of intervening also in favor of bonds and companies that, after the approval of these two measures, have undergone a lowering of their rating to the state of high yield represents an important element of novelty compared to the past. Small and medium-sized enterprises are allocated 950 billion (Main Street Lending Program), two thirds of which to purchase loans guaranteed by the Small Business Administration from banks and disbursed in connection with the Paycheck Protection Program established by the federal administration.
To meet the demand for US currency on the international market, the Federal Reserve has strengthened the existing dollar swap lines with the other main central banks, establishing new ones with those of a further nine countries; it also allowed all other monetary authorities to access very short-term dollar repurchase agreements against US government securities held by them and deposited with the Federal Reserve (Foreign and International Monetary Institutions Repo Facility).
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/tutte-le-mosse-di-fed-boe-e-boj-anti-covid-report-banca-ditalia/?utm_source=rss&utm_medium=rss&utm_campaign=tutte-le-mosse-di-fed-boe-e-boj-anti-covid-report-banca-ditalia on Mon, 15 Jun 2020 05:55:49 +0000.