Term Securities Lending Facility - TSLF


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.

  1. Liquidity

    The degree to which an asset or security can be quickly bought ...
  2. Monetary Policy

    Monetary policy is the actions of a central bank, currency board ...
  3. Residential Mortgage-Backed Security ...

    A type of security whose cash flows come from residential debt ...
  4. Federal Reserve Bank

    The central bank of the United States and the most powerful financial ...
  5. U.S. Treasury

    Created in 1798, the United States Department of the Treasury ...
  6. Ben Bernanke

    The chairman of the board of governors of the U.S. Federal Reserve. ...
Related Articles
  1. Economics

    The Federal Reserve

    Few organizations can move the market like the Federal Reserve. As an investor, it's important to understand exactly what the Fed does and how it influences the economy.
  2. Economics

    Ben Bernanke: Background And Philosophy

    Get some insight into the man at the forefront of key U.S economic decisions.
  3. Personal Finance

    How The U.S. Government Formulates Monetary Policy

    Learn about the tools the Fed uses to influence interest rates and general economic conditions.
  4. Forex Education

    Get To Know The Major Central Banks

    The policies of these banks affect the currency market like nothing else. See what makes them tick.
  5. Personal Finance

    How The Federal Reserve Manages Money Supply

    Find out how the Fed manages bank reserves and this contributes to a stable economy.
  6. Personal Finance

    What Are Central Banks?

    They print money, they control inflation, and much, much more. All you need to know about central banks is here.
  7. Investing Basics

    Subprime Lending: Helping Hand Or Underhanded?

    These loans can spell disaster for borrowers, but that doesn't mean they should be condemned.
  8. Investing Basics

    How to Use Boring CDs to Diversify

    Markets are volatile and are in for more punishment. CDs can help investors earn some interest while they're waiting out the storm.
  9. Investing

    Breaking Down the Federal Reserve's Dual Mandate

    The Fed has been tasked with a dual mandate by Congress to achieve monetary stability. We explain what the dual mandate is and what it means.
  10. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  1. How do central banks acquire currency reserves and how much are they required to ...

    A currency reserve is a currency that is held in large amounts by governments and other institutions as part of their foreign ... Read Full Answer >>
  2. How does the government influence the securities market?

    Governments generally say they don't like to take an active role in the securities market (except for regulating it); however, ... Read Full Answer >>
  3. How do central banks inject money into the economy?

    Central banks use several different methods to increase (or decrease) the amount of money in the banking system. These actions ... Read Full Answer >>
  4. Are mutual funds considered cash equivalents?

    Though all mutual funds are considered liquid assets, only certain funds are considered cash equivalents. What Is a Cash ... Read Full Answer >>
  5. Do mutual funds invest only in stocks?

    Mutual funds invest in stocks, but certain types also invest in government and corporate bonds. Stocks are subject to the ... Read Full Answer >>
  6. Why is my 401(k) not FDIC-Insured?

    401(k) plans are not FDIC-insured because they are typically composed of investments rather than deposits. The Federal Deposit ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  2. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  3. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  4. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  5. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  6. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!