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The effective, or average, interest rate on
federal funds, or the cost for banks to borrow excess reserves
from each other, was 0.13 percent, up from 0.08 percent on
Friday, Fed data showed. The Fed adopted a fed funds target of
0.00-0.25 percent in December 2008 at the height of the global
credit crisis.
The fed funds rate traded in a range of 0.05 percent to 0.3125
percent on Monday, according to the Fed.
On Monday, the U.S. central bank raised the reverse repurchase
interest rate it pays Wall Street dealers, money market mutual
funds and mortgage finance agencies to borrow its Treasuries
holdings to 0.10 percent on Monday from 0.07 percent on Friday.
Reverse repo agreements are designed to drain cash from the
banking system to keep the fed funds rate at the level the
central bank targets.
Other U.S. overnight borrowing costs rose because of the
increase in the Fed's reverse repo rate.
The overnight interest rate was quoted at 0.23 percent in the $5
trillion repurchase agreement market, where banks and Wall
Street raise cash daily to fund their trades and operations.
That was little changed from the one-month high at Monday's
close, according to interbroker dealer ICAP.
The Fed's higher RPP test rate, however, has not affected
Treasury bills, whose interest rates have been held down by
rising year-end demand from money market funds and other cash
investors, analysts said.
T-bill rates on issues due in the coming days into the first
quarter of 2015 were quoted at 0.01 percent to 0.03 percent,
Tradeweb data showed.
(Reporting by Richard Leong; Editing by Chizu Nomiyama and Lisa
Von Ahn)
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