Question

What is the treasury repo market? Who participates in it? What specific policy measures has the...

  1. What is the treasury repo market? Who participates in it? What specific policy measures has the Federal Reserve taken as a result of the Corona Virus epidemic that affect their market? Why?

Homework Answers

Answer #2

Treasury market is the market which deals with sale or purchase of government treasury securities . As part of monetary policy federal reserve uses repo market to increase liquidity or reduce liquidity in the economy.

Participants of repo market are investment banks, market makers ,US Federal Reserve,etc.


Specific policy mesures and their reasons
1. The US fedreal Reserve have cut interest rates to 0% to increase liquidity and borrowing in the market. This would ecourage the economy to spend and overcome the recesion induced by COVID 19.
2. QE (Quantitative Easing): It is the process in which the US Federal reserve purchases securities which was done in 2008 cfinancial crisis. It is used to inject liquidity in the economy.

answered by: anonymous
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