31 Jul 2009, Joel Clark, Risk magazine
The secured commercial paper facility aims to channel funds to a broad range of corporates while enlarging the private issuance market and removing obstacles to corporate access to capital markets.
The initiative will be funded by advances from the Debt Management Office and the issuance of central bank reserves, when authorised by the monetary policy committee (MPC).
The bank has specified that no underlying asset should have an expected final maturity of more than 18 months, the weighted average life of all the assets purchased should not be more than nine months, and only sterling-denominated securities will be purchased.
According to weekly data published by the US Federal Reserve, the total amount of commercial paper outstanding in the US is contracting at the fastest rate on record, registering a 28% decline year-on-year.
The UK's programme is an extension of the Bank of England's existing asset purchase facility, or ‘quantitative easing', which began in March and has purchased more than £112 billion of government bonds, with a total of £125 billion available. The scale of the asset purchase facility is set to be reviewed at the MPC meeting next week, August 5–6.
Full details of the programme can be found here: http://www.bankofengland.co.uk/markets/marketnotice090730.pdfSee also: UK quantitative easing hits pensions
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