Euro Feds

DEFINITION of 'Euro Feds'

A federal wire transmission advancing funds in Eurodollars from a U.S. bank with excess funds to another with insufficient reserves. Euro Feds settling in London clear through the clearingshouse interbank payments system (CHIPS) whereas transactions taking place in New York go through the Fedwire.

BREAKING DOWN 'Euro Feds'

In some instances it may be more attractive for a U.S. bank to borrow or place funds in the Euro market rather than buying or selling Federal funds. However rates on both Fed funds and overnight Eurodollars are closely related.

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