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Operation 1 - RESULTS
Operation Date: 09/23/2008
Operation Type: Outright Agency Discount Note Purchase
Release Time: 1:57 PM
Close Time: 2:30 PM
Settlement Date: 09/24/2008
Total Par Amt Accepted (mlns) : $2,000
Total Par Amt Submitted (mlns) : $4,063
One of the ways for a central bank to stave off credit contraction and deflation is to directly monetize paper assets - in simplified terms this means using printing press money to buy worthless paper assets instead of letting those assets meet the price discovery process in an open market.
The U.S. Federal Reserve on Tuesday bought $2 billion in short-term debt from mortgage agencies as it tried to ease stresses caused by struggling money market funds.
"They are taking agency discount notes out of the market so they can help keep money market funds from breaking the buck," said Michael Franzese, head of government trading at Standard Chartered in New York. "The Fed operation is like a direct infusion," he said.