WASHINGTON (MNI) – The following is the text of a statement Tuesday
from the New York Federal Reserve Bank announcing the start Wednesday of
small-scale reverse repurchase agreements with dealers:

As noted in the October 19, 2009 Statement Regarding Reverse
Repurchase Agreements, the Federal Reserve Bank of New York (FRBNY) has
been working internally and with market participants on operational
aspects of triparty reverse repurchase agreements to ensure that this
tool will be ready if the Federal Open Market Committee decides it
should be used. In the November 30, 2009 statement, FRBNY announced a
series of small-scale, real-value transactions with primary dealers
using U.S. Treasury and direct agency debt securities from the System
Open Market Account (SOMA) portfolio as collateral.

Beginning tomorrow, FRBNY intends to conduct a similar series of
small-scale, real-value reverse repurchase transactions with primary
dealers using all eligible collateral types, including, for the first
time, agency mortgage-backed securities (MBS) from the SOMA portfolio.
Of note, in contrast to the SOMA holdings of U.S. Treasury and direct
agency debt securities which are maintained in an account at FRBNY, the
SOMA holdings of agency MBS securities 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.

Like the earlier operational readiness exercises, this work is a
matter of prudent advance planning by the Federal Reserve. It does not
represent any change in the stance of monetary policy, and no inference
should be drawn about the timing of any change in the stance of monetary
policy in the future.

These forthcoming operations are being conducted to ensure
operational readiness at the Federal Reserve, the triparty repo clearing
banks, and the primary dealers. The operations have been designed to
have no material impact on the availability of reserves or on market
rates. Specifically, the aggregate amount of outstanding transactions
will be very small relative to the level of excess reserves, and the
transactions will be conducted at current market rates.

The results of these operations will be posted on the Federal
Reserve Bank of New Yorks public website where all temporary open
market operation results are posted. The outstanding amounts of reverse
repos are reported as a liability item in tables 1, 10, and 11 in the
Federal Reserve Systems H.4.1 statistical release
(http://www.federalreserve.gov/releases/h41/).

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$,MT$$$$]