Fed may up TAF offering size, extend term-JPMorgan

NEW YORK, May 16 (Reuters) - The Federal Reserve may raise the offering size and extend the term of loans to banks from its Term Auction Facility in a bid to reduce strains in the U.S. banking system, JPMorgan analysts said on Friday.

The Fed has already enlarged TAF auction size several times since it was conceived late last year. At the latest TAF auction held earlier this month, banks bid for $75 billion worth of 28-day funds at a clearing rate of 2.22 percent.

Terry Belton, JPMorgan's head of fixed income and derivative strategy, said during a teleconference that the U.S. central bank may decide in the next few months to stretch the TAF loan term to three months.

Further adjustments to TAF will be another step "to move Libor significantly lower," Belton said, referring to interbank borrowing costs. (Reporting by Richard Leong; Editing by Dan Grebler)