Term Federal Funds

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. When was the last time the Federal Reserve hiked interest rates?

    Learn about when the U.S. Federal Reserve last increased the federal funds target rate, which was in June 2006 after the ... Read Answer >>
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    Learn the implications of a high federal funds rate, which include constriction of the money supply, a stronger dollar and ... Read Answer >>
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