Document Type

Case Study

Case Series

Market Support Programs

JEL Codes

G01, G28


In March 2020, the uncertain outlook for the United States in the face of the COVID-19 pandemic prompted extremely high demand for cash and near-cash assets. Amid intense selling pressure from investors, securities dealers were unable to fully absorb the high volume of trade orders into their inventory due to balance sheet capacity and funding constraints. As dealer capacity declined and demand for liquidity continued rising, volatility spread to the critical and normally highly liquid market for US Treasury securities, prompting the Federal Reserve to increase open market operations (March 12) and begin historically large purchases of US Treasuries (March 16). On March 17, the Fed used its Section 13(3) emergency authority to establish the Primary Dealer Credit Facility (PDCF), modeled after a program that the Fed implemented in response to the Global Financial Crisis (GFC) in 2008. The PDCF lent to primary dealers at the primary credit rate for up to 90 days, collateralized by dealers' inventory of securities. Compared to the 2008 PDCF, the 2020 PDCF accepted a narrower range of collateral, offered terms longer than overnight, and did not charge a penalty fee for frequent use. Use of the PDCF peaked at $35.6 billion in loans outstanding the week of April 15, 2020, then gradually decreased. The PDCF expired on March 31, 2021, after two extensions to its operating dates.

Date Revised