Fed sets rates in commercial paper programme debut

NEW YORK (Reuters) - The Federal Reserve set the interest rates it will charge issuers to buy commercial paper from banks and companies through a debut programme to provide liquidity for this debt sector, the New York Fed said on Monday.

The Commercial Paper Funding Facility, which was announced in Oct 7, is one of the several measures created by Fed to increase the supply of funds for many corporations that rely on selling commercial paper to raise short-term money for their daily operations.

Amid the financial crisis, money market mutual funds -- a critical class of CP investors -- stopped buying these corporate IOUs.

The Fed said it will charge 1.88 percent for unsecured commercial paper and 3.88 percent for asset-backed commercial paper, the New York Fed said on its Web site.

The Fed's CPFF programme will buy 30-day commercial paper rated at least A-1/P-1/F1 by the major bond rating agencies.

(Reporting by Richard Leong)