Term Securities Lending Facility - TSLF

AAA

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. Monetary Policy

    The actions of a central bank, currency board or other regulatory ...
  2. Residential Mortgage-Backed Security ...

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

    The central bank of the United States and the most powerful financial ...
  4. Federal Open Market Committee - ...

    The branch of the Federal Reserve Board that determines the direction ...
  5. Liquidity

    1. The degree to which an asset or security can be bought or ...
  6. U.S. Treasury

    Created in 1798, the United States Department of the Treasury ...
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. Mutual Funds & ETFs

    ETF Analysis: iShares National AMT-Free Muni Bond

    Take an in-depth look at the iShares National AMT-Free Municipal Bond ETF, a highly diverse and very popular muni bond fund.
  9. Investing News

    China's Government to Stop Intervening in Stock Markets

    China’s stock market, measured by Shanghai Composite Index, lost about 17% of its value in the first three days of week ending August 28, 2015 before recovering its value by 11% in the last two ...
  10. Investing Basics

    What's a Treasury Note?

    A treasury note is a U.S. government debt security that offers a fixed interest rate and a maturity date that ranges between one and 10 years.
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. How is the Federal Reserve audited?

    Contrary to conventional wisdom, the Federal Reserve is extensively audited. Politicians on the left and right of a populist ... Read Full Answer >>
  6. Who decides when to print money in the US?

    The U.S. Treasury decides to print money in the United States as it owns and operates printing presses. However, the Federal ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  2. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  3. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  4. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  5. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  6. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
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!