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 100 basis points above the three-month overnight index swap rate. These purchases will also be subject to a 100-basis-point surcharge. Asset-backed commercial paper will be purchased at 300 basis points above the three-month overnight index swap rate. The Fed unveiled the facility last week.