The Federal Reserve yesterday announced an expansion of its securities lending program under which it will lend, via auction, up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days rather than overnight, as in the existing program. The securities will be backed by a pledge of other securities, including federal agency debt, federal agency residential mortgage-backed securities, and non-agency triple-A-rated private-label residential MBS.

The term securities lending facility is intended to promote liquidity in the financing markets for Treasury and other collateral, and thus to foster the functioning of financial markets more generally.

Auctions will be held on a weekly basis beginning on March 27.

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