The Federal Reserve has toyed for years with opening something called a standing repo facility to prevent short-term rates markets from blowing up. Following a 2019 disruption and another early in the pandemic, the central bank finally took that step.

The permanent repurchase-agreement facility, one for domestic firms and another for foreign ones, will backstop money markets, which were hobbled last year as Covid gripped the global economy. The decision to create the facilities followed several years of discussion within the market about whether they are needed and what form they might take. The Fed already has temporary repo facilities.

The Fed is taking action at a time when the market is being pressured by problems that are essentially opposite to the ones it faced during the turmoil seen in recent years. Continued Fed asset purchases, the Treasury cutting its cash balance because of the debt ceiling, and other issues have created a glut of cash at the front end. That's suppressed rates on repo, Treasury bills, and related instruments.