By Michael S. Derby 

The Federal Reserve Bank of New York said its new facility to assist the commercial paper market will launch April 14.

Applications for participation in the Commercial Paper Funding Facility must be submitted by Thursday, the bank said. The facility is part of a smorgasbord of tools aimed at helping the financial system navigate the shock of the coronavirus crisis.

Commercial paper securities are de facto short-term IOUs issued by companies and local governments. The New York Fed said the commercial paper facility will help smooth those funding needs by buying eligible three-month corporate, asset-backed and municipal commercial paper from eligible issuers.

The New York Fed says on its website "the commercial paper market has been under considerable strain as investors have become reluctant to purchase commercial paper," and that resulted in surging interest rates and some firms being unable to access the market. The Fed says its support to this market will provide "credit that will support families, businesses, and jobs across the economy."

The commercial paper will be bought by a special vehicle created by the central bank, seeded with $10 billion from the Treasury Department.

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

(END) Dow Jones Newswires

April 06, 2020 13:00 ET (17:00 GMT)