The Federal Reserve Bank of New York this week stated its intention to conduct a series of small-scale reverse repurchase transactions with primary dealers using all eligible collateral types, including, for the first time, agency mortgage-backed securities (MBS) from the System Open Market Account (SOMA) portfolio.
In November 2009, the New York Fed announced a similar series of small-scale reverse repos with primary dealers using U.S. Treasury and direct agency debt securities as collateral. The New York Fed has been working internally since last fall on operational aspects of tri-party reverse repurchase agreements to ensure such agreements will be ready if the Federal Open Market Committee decides they should be used.
In contrast to the SOMA holdings of Treasury and direct agency debt securities, which are maintained in an account at the New York Fed, the SOMA holdings of agency MBS are currently maintained at a custodian. As a result, certain operational and legal arrangements for transactions involving agency MBS collateral differ from those in place for transactions involving U.S. Treasury and direct agency debt securities as collateral, the New York Fed says.
The announcement does not represent any change in the stance of monetary policy, the New York Fed adds.
SOURCE: New York Fed