Top central banks enhance USD liquidity in coordinated action
The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank will offer 7-day US dollar operations on a daily basis.
The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank have announced a coordinated action to enhance the provision of liquidity via the standing US dollar liquidity swap line arrangements.
The central banks currently offering US dollar operations have agreed to increase the frequency of 7-day maturity operations from weekly to daily in order to improve the swap lines’ effectiveness in providing US dollar funding,
These daily operations will commence on Monday, 20 March 2023, and will continue at least through the end of April to support the smooth functioning of US dollar funding markets
The network of swap lines among these central banks is a set of available standing facilities and serves as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses.
In the UK, the BoE will announce details of the day’s US dollar repo operation and the rate applicable for that day’s operation at 08.15 London time. The operations will take place at 08.15 London time, and the closing time for bids will be 08.45 London time. The results of the day’s USD repo operation will be announced by the Bank at 10.00 London time or as soon as possible thereafter.
The pricing for 7-day standing US dollar repo operations will be the matched maturity U.S. dollar overnight index swap (OIS) rate plus 25 basis points.
The coordinated action is taking place as Credit Suisse nearly went bankrupt and has been forced to merge with the other Swiss banking giant, UBS. News of the Credit Suisse near-collapse followed the shut down of Silicon Valley Bank, which has recently filed for bankruptcy.
