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The Fed injects another $72 billion into markets amid slowing demand

The Fed injects another $72 billion into markets amid slowing demand

U.S. Federal Reserve

  • The Federal Reserve on Friday auctioned another $72 billion worth of market repurchase agreements, or repos, in a continued effort to calm money markets and bring interest rates within its intended range.
  • The bank offered $22.7 billion in repos expiring overnight and $49 billion in repos expiring in 14 days, for a total of roughly $72 billion. The auction was undersubscribed.
  • The Fed kicked-off its repo offerings last week for the first time since the 2008 financial crisis last week after short-term interest rates began spiking.
  • Visit the Business Insider homepage for more stories.

The Federal Reserve continued its ongoing effort to stabilize shaky money markets on Friday with another round of capital injections totaling roughly $72 billion.

The central bank sold $22.7 billion in overnight repurchase agreements, or repos. It also offloaded $49 billion worth of repos scheduled to expire in 14 days. The latest operation was undersubscribed, meaning banks placed fewer bids for repos than the Fed offered.

The slump in demand comes after the central bank doubled the size of its repo operations on Thursday. Both Wednesday and Thursday's offerings were oversubscribed as banks showed a willingness to buy more repos than the Fed was selling.

Read more: The Fed has pumped hundreds of billions into the market through 'repo' offerings. Here's what they are, and why they're back for the first time since the financial crisis.

The Fed started repo offerings last week for the first time since the financial crisis a decade ago in order to calm money markets and bring short-term interest rates within its target range. Repo operations totalled $278 billion between Tuesday and Friday last week.

Also last week, the Federal Open Market Committee cut its benchmark interest rate by a quarter of a percentage point, landing in a window of 1.75% to 2%. Fed Chairman Jerome Powell called the repo offerings a temporary action.

The central bank is expected to sell at least $75 billion worth of overnight repos every business day until October 30, with some days auctioning as much as $60 billion worth of 14-day repos.

Now read: 'Some kind of warning sign': The CEOs of Bank of America and Blackstone sound off on the anomaly of subzero borrowing costs and the effect it's having on the economy

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