DEFINITION of 'Term Securities Lending Facility - TSLF'

A lending facility through the Federal Reserve that allows primary dealers to borrow Treasury securities on a 28-day term by pledging eligible collateral. The eligible securities under the term securities lending facility include 'AAA' to 'Aaa' rated mortgage-backed securities (MBS) not under review for downgrade, and all securities eligible for tri-party repurchase agreements. In exchange for this collateral, the primary dealers receive a basket of Treasury general collateral, which includes Treasury bills, notes, bonds and inflation-indexed securities form the Fed's system open market account.

BREAKING DOWN 'Term Securities Lending Facility - TSLF'

The term securities lending facility is operated by the open market trading desk. It holds weekly auctions in which dealers submit competitive bids for the basket of securities in $10 million increments. At the Federal Reserve's discretion, primary dealers may borrow up to 20% of the announced amount.

Created on March 11, 2008, the Fed originally pledged $200 billion to this facility in an attempt to relieve liquidity pressure in the credit markets, specifically the mortgage-backed securities market. By creating this facility, primary dealers including Fannie Mae, Freddie Mac and major banks can access highly liquid and secure Treasury securities in exchange for the far less liquid and less safe eligible securities. This helps to increase the liquidity in the credit market for these securities.

This facility was chosen as a bond-for-bond lending alternative to the term auction facility (TAF), a cash-for-bond program that injects cash directly into the market. A direct injection of cash can affect the federal funds rate and have a negative impact on the value of the dollar. It is also an alternative to the direct purchases of the mortgaged investments, which goes against the Federal Reserve's aim to avoid directly affecting security prices.

RELATED TERMS
  1. Committed Facility

    A credit facility whereby terms and conditions are clearly defined ...
  2. Facility Operations

    Includes all the services required to ensure a facility will ...
  3. Note Auction

    A formal bidding process that is scheduled on a regular basis ...
  4. Purchase and Resale Agreements ...

    An arrangement between the Bank of Canada and dealers whereby ...
  5. Securities Lending

    The act of loaning a stock, derivative, other security to an ...
  6. Primary Dealer Credit Facility ...

    An institution created by the Federal Reserve to provide overnight ...
Related Articles
  1. Investing

    Securities Lending: Cause Of The Next Financial Crisis?

    Securities lending can pose risks to investor's portfolios and the entire financial system.
  2. Small Business

    Bailout Acronyms 101

    The subprime meltdown gave rise to a mouthful of financial acronyms. Learn how to sort through this alphabet soup.
  3. Investing

    How Does Securities Lending Work?

    Securities lending is the act of loaning a stock or other security to an investor or firm.
  4. Small Business

    How Does a Credit Facility Work?

    A credit facility is a loan or collection of loans a business or corporation takes to generate capital over an extended period of time.
  5. Investing

    What Does a Dealer Do?

    Dealers possess certain qualities that distinguish them from brokers and traders.
  6. Investing

    Buy Treasuries Directly From The Fed

    If you want government securities, go straight to the source. We'll show you how.
  7. Insights

    What's a Dealer Market?

    In a dealer market, market participants buy and sell through dealers who are designated as market makers.
  8. Investing

    The ABCs of Mortgage-Backed Securities ETFs

    ETFs focused on mortgage-backed securities, or MBS, offer an opportunity to further diversify the fixed-income portion of your portfolio.
  9. Investing

    Introduction to Treasury Securities

    Purchasing bonds that are backed by the full faith and credit of the U.S. government can provide steady guaranteed income and peace of mind. Knowing the characteristics of each type of treasury ...
  10. Investing

    The Treasury And The Federal Reserve

    Find out how these two agencies create policies to stimulate the economy in tough economic times.
RELATED FAQS
  1. What is the difference between a repurchase agreement and reverse repurchase agreement?

    Learn how a repurchase agreement is a form of collateralized lending and a reverse repurchase agreement is a form of collateralized ... Read Answer >>
  2. What is the primary use of reverse repurchase agreements?

    Discover how the Federal Reserve utilizes reverse purchase agreements for the primary purpose of offsetting temporary shifts ... Read Answer >>
  3. What are the best ways to invest in mortgage-backed securities (MBS)?

    Find out how you can start investing in real estate through mortgage-backed securities. Read Answer >>
  4. What are the characteristics of a marketable security?

    Find out what it takes for a financial asset to be considered a marketable security, including its liquidity, intent of use ... Read Answer >>
  5. What is each party's role in a reverse repurchase agreement?

    Learn about the role of each party in a reverse repurchase agreement transaction, and find out why it's different if the ... Read Answer >>
  6. What's the difference between primary and secondary capital markets?

    In the primary market, investors buy securities directly from the company issuing them, while in the secondary market, investors ... Read Answer >>
Hot Definitions
  1. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  2. Money Market

    A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. ...
  3. Block (Bitcoin Block)

    Blocks are files where data pertaining to the Bitcoin network is permanently recorded.
  4. Fintech

    Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century.
  5. Ex-Dividend

    A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be ...
  6. Debt Security

    Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount ...
Trading Center