Fed Injects $540bn Into Markets
Third attempt in a month by US Federal Reserve to help market with aid to mutual funds
The US Federal Reserve is set to pump $540bn (£323bn) into money market assets as it joined countries around the world trying to revive the financial system.
As Japan and France extended more help to banks, the Fed provided aid to mutual funds which have suffered higher than expected redemptions from investors amid liquidity concerns.
Yesterday the Fed said the move was designed to "improve the liquidity position of money market investors, thus increasing their ability to meet any further redemption requests and their willingness to invest in money market instruments".
JPMorgan Chase will run five special funds that will buy certificates of deposit, bank notes and commercial paper from money market mutual funds.
It is the third attempt in a month by the Fed to help the market. Earlier this month it agreed for the first time to buy commercial paper - the short-term debt companies use to fund day-to-day operations - and in September agreed to lend to banks to fund purchases of asset-backed commercial paper from money markets.
The money markets showed further signs of easing yesterday as overnight Libor rates in dollars, sterling and euros fell. The cost of borrowing overnight dollar funds dropped below the Fed's 1.5% target rate.
As Japan and France extended more help to banks, the Fed provided aid to mutual funds which have suffered higher than expected redemptions from investors amid liquidity concerns.
Yesterday the Fed said the move was designed to "improve the liquidity position of money market investors, thus increasing their ability to meet any further redemption requests and their willingness to invest in money market instruments".
JPMorgan Chase will run five special funds that will buy certificates of deposit, bank notes and commercial paper from money market mutual funds.
It is the third attempt in a month by the Fed to help the market. Earlier this month it agreed for the first time to buy commercial paper - the short-term debt companies use to fund day-to-day operations - and in September agreed to lend to banks to fund purchases of asset-backed commercial paper from money markets.
The money markets showed further signs of easing yesterday as overnight Libor rates in dollars, sterling and euros fell. The cost of borrowing overnight dollar funds dropped below the Fed's 1.5% target rate.
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