UPDATE 1-Brokers borrow no money from Fed in week-Fed

(Adds background, analyst comments)

By John Parry

NEW YORK, July 10 (Reuters) - U.S. investment banks borrowed no money from the Federal Reserve in the latest week, the first time primary dealers have not sought cash directly from the Fed since the emergency facility was introduced in March following the near collapse of Bear Stearns, then the fifth-biggest U.S. investment bank.

The previous week, dealers had borrowed a daily average of $1.74 billion from the Primary Dealer Credit Facility (PDCF).

Peak borrowing via the PDCF came in the immediate aftermath of the Bear Stearns debacle, hitting a peak daily average of $38.118 billion in the week ended April 3 and has been falling rapidly over the past month or so.

Last week the portfolio of assets of Bear Stearns held by the Fed was valued and placed as a line item in the H.4.1. release, which gives details of the PDCF borrowings as well as banks' direct borrowing from the Fed via the discount window.

The Federal Reserve's portfolio of Bear Stearns assets, held by holding company Maiden Lane LLC, was valued at $28.94 billion as of July 9, up from $28.89 billion on July 2.

"Some of this primary dealer credit lending that existed prior to last week was the direct funding of Bear Stearns. Presumably when this acquisition and these assets were put on the Maiden Lane balance sheet, some of this funding (via the PDCF) became less necessary," said Ray Stone, economist with Stone & McCarthy Research Associates, in Princeton, New Jersey.

Now that the Bear Stearns borrowings do not show up in the PDCF, other investment banks "may be disinclined to borrow from this facility and may want to fly under the radar" so that their borrowings do not stand out, even though individual dealers have anonymity in the data, said Stone.

The news of PDCF borrowings shrinking to zero comes after Fed Chairman Ben Bernanke said this week the Fed may keep the facility in place through year end. Initially it had been set to expire in September.

The PDCF is one of several facilities the Fed has introduced to provide cheap financing to financial institutions pinched by the credit crisis.

Banks' discount window borrowings averaged $13.01 billion per day in the week ended July 9, down from an average $16.78 billion per day the previous week.

Primary credit borrowings averaged $12.86 billion per day in the latest week, down from $14.86 billion the previous week. (Tamawa Kadoya contributed to this report) (Reporting by John Parry; Editing by Dan Grebler)