By Michael S. Derby 

The New York Fed injected $75 billion in overnight liquidity into financial markets on Wednesday.

The intervention came via one-day overnight repurchase agreements with eligible banks. The banks had offered the Fed $80.35 billion in securities. The Fed took in $72.592 billion in Treasurys and $2.408 billion in mortgage-backed securities.

In recent operations, the banks dealing with the Fed utilized less liquidity than the central bank was willing to offer. But some observers noted Tuesday was a day of pressure for short-term markets due to the settlement of Treasury debt auctions, which can affect reserve levels in the banking system.

Fed repo operations take in Treasury and mortgage securities from eligible banks in what is effectively a one-night loan of central bank cash, collateralized by dealer-owned bonds. Last month, the Fed ramped up its repo operations for the first time in over a decade to help tame spiking short-term borrowing costs.

Those operations have been largely successful. But central bankers have also sought a more enduring fix for what appears to be a shortage of reserves in the banking system, so last week the Fed announced that it would also begin growing what is a $3.9 trillion balance sheet via purchases of up to $60 billion a month of Treasury bills through the first half of next year.

The Fed also said then that its temporary interventions would continue alongside efforts to permanently grow the balance sheet. The Fed stressed that expanding its holdings of bonds and cash is purely technical and not intended to serve as a form of stimulus, as bond buying was during the financial crisis and its aftermath.

Last Friday, the Fed announced a series of multiday repo operations that will run over coming weeks. The next 15-day repo intervention will take place on Thursday.

Write to Michael S. Derby at michael.derby@wsj.com

(END) Dow Jones Newswires

October 16, 2019 09:24 ET (13:24 GMT)