NEW YORK, Sept 30 (Reuters) - The key lending rate between U.S. banks skyrocketed on Tuesday with other market interest rates after a surprise defeat of a $700 billion bank bailout plan caused a further drop in global credit availability.
The interest rate on federal funds, or supply of surplus reserves that banks lend to each other overnight, opened at 7 percent, well above the current 2 percent target rate set by the Federal Reserve.
The effective or average rate on fed funds was 1.56 percent on Monday after trading between 0.01 percent and 3.00 percent, according to the New York Fed.
In other bank lending, the London interbank offered rate (Libor) on overnight dollar funds jumped by a record 430 basis points to 6.87 percent, the highest in at least 7-1/2 years, according to Reuters data. For more, see [ID:nLU525615] (Reporting by Richard Leong; Editing by James Dalgleish)