The Federal Reserve announced on Friday that it expanded support for state and municipal money markets using the new money market liquidity facility through the Federal Reserve Bank of Boston.
The Fed further added that it will now be able to lend to financial institutions secured by assets purchased from single-state or other tax-exempt money market mutual funds.
“Rate on loans secured by short-term muni debt will be the Fed’s primary rate plus 25 basis points,” the statement read. “Eligible collateral includes US municipal short-term debt with a maturity of less than 12 months and with a rating of SP1/MIG1/F1.”
Market reaction
Wall Street’s main indexes extend rebound on Friday. As of writing, the Nasdaq Composite was up 2.6% on the day while the Dow Jones Industrial Average and the S&P 500 were adding 2% and 1.5%, respectively.
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