Term Federal Funds

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DEFINITION of 'Term Federal Funds'

Balances purchased in Federal Reserve accounts for more than a single day. Term federal funds usually have a maximum term of 90 days. Banks purchase these funds when their borrowing needs will last for several days.

BREAKING DOWN 'Term Federal Funds'

Banks also purchase term federal funds in order to lock in the current short-term interest rate in a rising rate environment. They resemble overnight federal funds in that they are not subject to reserve requirements. For this reason, they are often purchased in lieu of other comparable instruments with similar maturities.

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RELATED FAQS
  1. How is the Federal Reserve audited?

    Contrary to conventional wisdom, the Federal Reserve is extensively audited. Politicians on the left and right of a populist ... Read Full Answer >>
  2. Who decides when to print money in the US?

    The U.S. Treasury decides to print money in the United States as it owns and operates printing presses. However, the Federal ... Read Full Answer >>
  3. Why do some people claim the Federal Reserve is unconstitutional?

    The U.S. Constitution does not mention the need for a central bank, nor does it explicitly grant the government the power ... Read Full Answer >>
  4. How can the federal reserve increase aggregate demand?

    The Federal Reserve can increase aggregate demand in indirect ways by lowering interest rates. Aggregate demand is a measure ... Read Full Answer >>
  5. How does the stock market react to changes in the Federal Funds Rate?

    The stock market reacts to changes in the federal funds rate in various ways depending on where it is in the business cycle. ... Read Full Answer >>
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    The bond market is highly sensitive to changes in the federal funds rate. When the Federal Reserve increases the federal ... Read Full Answer >>

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