US Primary Dealers Drop Borrowings At New Fed Facility

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Lending through the primary dealer credit facility totaled $26.479 billion as of Wednesday, down from $34.443 billion the previous week.

On March 16, the Fed decided to lend to investment banks from the discount window, a privilege previously reserved for more tightly regulated commercial banks. It also expanded the types of eligible collateral in an effort to provide liquidity to strained markets like mortgage-backed securities.

Average daily borrowing for the primary dealer facility was $32.562 billion the week ended April 9, down from $38.118 billion the week prior.

Total borrowings at the discount window, including depository institutions, stood at $33.838 billion as of Wednesday. Average daily borrowing was $42.761 billion, according to Thursday's report.

The Fed has also expanded its Term Securities Lending Facility in which it lends out Treasurys against collateral to the primary dealers in an effort to improve liquidity in strained repo markets. The report Thursday showed term facility borrowings at $100.00 billion the week ended April 9.

The Fed's holdings of Treasurys securities fell, meanwhile, to $560.114 billion from $581.240 billion.

The Fed last month lowered the discount rate it charges banks and brokers that borrow directly from the Fed by three-quarters of a percentage point to 2.50%. It also slashed the target of the federal funds rate at which banks lend to each other by 75 basis points to 2.25%.

Lending through the primary credit facility as of Wednesday was $10.182 billion, according to Thursday's report. Seasonal credit was $17 million.