Fed Details Commercial Paper Plan

WASHINGTON — The Federal Reserve Board announced new details Tuesday on its plan to buy unlimited amounts of commercial paper to prop up the credit markets.

The central bank said it would begin making purchases under the “commercial paper funding facility” on Oct. 27. The Fed will continue the purchases through April 30 and will disclose the level of buying each week.

Unsecured commercial paper will be priced at the three month overnight index swap rate plus 100 basis points. These purchases will also be subject to a 100 basis point surcharge.

Asset-backed commercial paper will be purchased at the three month overnight index swap rate plus 300 basis points.

The Fed unveiled the CPFF last week in an effort to unfreeze the commercial paper market that many companies rely on for short-term funding.

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