Fed expands lending facility to support municipal bond market

US Federal Reserve, Washington, DC

The Federal Reserve has just expanded the collateral eligible under its facility announced on March 19 designed to lend indirectly to money market mutual funds.

The Money Market Mutual Fund Liquidity Facility (MMLF) will now also accept state government debt and municipal securities as collateral. The maturity of municipal securities now eligible for the facility is limited to 12 months and only those bonds with a high credit rating.

Through the facility, the Money Market Mutual Fund Liquidity

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