Data Management

Repo Market Effects Of The Term Securities Lending Facility

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Executive Summary

The Term Securities Lending Facility (TSLF) was recently introduced by the Federal Reserve to promote liquidity in the financing markets for Treasury and other collateral. This paper evaluates one aspect of the program - the extent to which it has narrowed repo spreads between Treasury collateral and lower quality collateral. It is found that TSLF operations have precipitated a significant narrowing of repo spreads. More refined tests indicate the market conditions and types of operations associated with the program's effectiveness. Various additional tests, including a split sample test, suggest that the findings are robust.

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