NY Fed adds extra daily standing repo operation covering year-end

(Reuters) - The Federal Reserve Bank of New York on Thursday said it will add an extra operation of its standing repo facility in the days covering the end of the calendar year into early January.

In addition to its daily SRF operation occurring between 1:30 p.m. and 1:45 p.m. EST, the New York Fed will offer an operation between 8:15 a.m. and 8:30 a.m. each day beginning Dec. 30 through Jan. 3, 2025, it said in a statement. The aggregate operation limit of $500 billion will apply to the combined daily operations.

"These additional morning operations are intended to be technical exercises for the purpose of increasing the Federal Reserve's understanding of how SRF operation times can support effective policy implementation and market functioning during periods of expected money market pressures," the New York Fed said.

The SRF is designed to provide liquidity as needed to banks looking to meet short-term funding requirements. The interest rate charged by the New York Fed is at the top end of the federal funds target range and is meant to act as a ceiling to prevent the funds rate from drifting above the target range.

The rate is also typically higher than the rate available in open-market repo transactions, which has contributed to its limited usage. That said, it could see an increase during the year-end period as occurred at the end of the third quarter on Sept. 30 when $2.6 billion was drawn in overnight funds.

Year-end is a period when banks typically limit what they bring onto the balance sheet, so firms in need of funding may find fewer options for liquidity and turn to the SRF instead.

(Reporting by Dan Burns; Editing by Andrea Ricci)