Effective Monday, October 21, 2013, the Federal Reserve Bank of New York (FRBNY) revised the terms of its daily, overnight fixed-rate reverse repurchase operational exercise, to increase the fixed rate from 1 basis point to 2 basis points. All other terms of the exercise will remain the same.

Since 2009, the Open Market Trading Desk (the Desk) of the FRBNY has been working with market participants on operational aspects of tri-party reverse repurchase agreements (RRPs) to ensure that this tool will be ready to support the monetary policy objectives of the Federal Open Market Committee (Committee). In September, the Committee instructed the Desk to further examine how a potential overnight, fixed-rate full-allotment RRP facility might affect short-term interest rates. As a result, the Desk will conduct a series of daily overnight, fixed-rate RRP operations through the end of January 2014.

The FRBNY is interested in running these exercises with larger transactional flows to view what effect such operations would have on interest rate control. The FRBNY has stated that this is only intended as an operational exercise as part of advance planning and is not intended to materially affect the current level of short-term interest rates.

A link to this notice can be found here.