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Fed Opens New Emergency Lending Program for Primary Dealers

Christopher Condon

(Bloomberg) -- The Federal Reserve on Tuesday opened an emergency lending program for primary dealers in yet another step aimed at keeping cash flowing into a U.S. economy shuddering under the impact of the coronavirus pandemic.

The Primary Dealer Credit Facility “will offer overnight and term funding with maturities up to 90 days and will be available on March 20, 2020,” the central bank said in a statement.

The facility will run for at least six months, the statement said, and may be extended. It will be offered at the discount rate, which was cut to 0.25% on Sunday evening in an emergency move by the central bank when it lowered its benchmark federal funds rate to nearly zero.

“The establishment of a PDCF will help address illiquidity, mitigate disruptions in funding markets, support smooth market functioning and help facilitate the availability of credit to American workers and businesses,” Treasury Secretary Steven Mnuchin said in a separate statement Tuesday.

The move marks the second introduction of an emergency lending facility on Tuesday. Earlier in the day, the Fed rolled out the Commercial Paper Funding Facility aimed at insuring the flow of short-term credit directly to companies.

Primary dealers are those banks and broker-dealers that are licensed to trade directly with the Fed and serve as market makers for U.S. Treasuries, buying U.S. debt at auction and re-selling it to the public.

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