The first three of the Federal Reserve Bank of New York’s mega repo operations have drawn far lighter demand than what the central bank is willing to provide.

On Thursday, the central bank shocked observers by announcing it would offer, in addition to its existing slate of loans to major banks, three repurchase agreements, or repos, that would provide eligible banks up to $500 billion per operation over an extended time horizon. The Fed said then it acted to “address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak.”

While the overall pool of Fed liquidity has surged, eligible banks, called primary dealers, have thus far have not come close to tapping all the money the central bank can provide via the new slate of interventions.

On Thursday, the Fed’s first mega repo, which was one of four repo interventions that day, saw demand of $78.4 billion versus the half trillion dollar limit. On Friday, two of the repos, which collectively would have offered banks $1 trillion, saw bank demand of $17 billion in one operation, and $24.1 billion in the other. Meanwhile, the amount of money sought by dealers for the weekend was also well short of the Fed’s $175 billion cap, at $45.15 billion.

Collectively, the amount of temporary liquidity provided to financial markets by way of its repo interventions fell from $361.5 billion on Thursday to $344.65 billion on Friday.

The repo market shook the financial world in September when an unexpected rate spike choked short-term lending, spurring the Federal Reserve to intervene. WSJ explains how this critical, but murky part of the financial system works, and why some banks say the crunch could have been prevented. Illustration: Jacob Reynolds for The Wall Street Journal

Fed repo operations are a longstanding tool the central bank uses to help it control the federal-funds rate, which in turn influences the overall cost of credit, to achieve the central bank’s inflation and job goals.


Fed repo operations take in Treasury, mortgage and agency securities in what is effectively a loan to banks, collateralized by the bonds. Primary dealers pay the Fed interest for the repo loans and are capped on what they can individually borrow.

The New York Fed also announced on Friday an accelerated pace of $50 billion in Treasury purchases as part of the effort announced on Thursday to move what had been $60 billion per month in Treasury bill buying into longer-dated securities. Some observers said that while this change may have not attracted the same level of attention, it may go farther in improving troubled functioning in Treasury markets.

Write to Michael S. Derby at michael.derby@wsj.com