Fed awards record amount of term deposits

NEW YORK, July 1 Tue Jul 1, 2014 12:21pm EDT

NEW YORK, July 1 (Reuters) - The Federal Reserve awarded a record amount of seven-day term deposits to banks at an auction held on Monday, it said in a statement on Tuesday.

The U.S. central bank allotted $124.9 billion of them to 58 banks which will receive an interest rate of 0.29 percent.

This compared with the $92.4 billion in deposits awarded a week earlier to 46 banks which received an interest rate of 0.28 percent.

The Fed has ramped up testing of its term deposit facility after the 2008 financial crisis to help policy-makers drain cash from the banking system when they decide to tighten monetary policy.

On Monday, the Fed issued a record $339.5 billion of fixed-rate reverse repurchase agreements to 97 banks, money market funds and mortgage finance agencies to whom it will pay an overnight rate of 0.05 percent.

These reverse repos are another tool for the Fed to drain money from the banking system. (Reporting by Richard Leong; Editing by James Dalgleish)

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