WASHINGTON (Reuters) - The Federal Reserve on Tuesday announced it would create a special-purpose facility, with the Treasury Department's blessing, to begin buying commercial paper in yet another emergency move aimed at calming chaotic financial markets.
The central bank said it was acting because money market mutual funds and other investors have become increasingly reluctant to buy commercial paper, which is widely issued to provide vital funds for day-to-day business operations at many companies.
"The volume of outstanding commercial paper has shrunk, interest rates on longer term commercial paper have increased significantly, and an increasingly high percentage of outstanding paper must now be refinanced each day," the Fed said.
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