September 26, 2008 / 1:55 PM / in 9 years

UPDATE 1-US Fed does $20 bln 3-day reverse repo to drain

NEW YORK, Sept 26 (Reuters) - The U.S. Federal Reserve said on Friday it undertook a $20 billion 3-day reverse repurchase agreement, according to the New York Fed Website, an operation which drains temporary reserves from the banking system.

To implement monetary policy, short-term repurchase and reverse repurchase agreements are used to temporarily affect the size of the Federal Reserve System’s portfolio and to influence day-to-day trading in the federal funds market.

Federal funds in the U.S. interbank lending market were trading steady at 1.50 percent after the operation, below the 2.0 percent target rate the Fed sets. (Reporting by John Parry; Editing by Theodore d‘Afflisio)

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