Federal funds rate
the interest rate on overnight loans of reserves kept at the Federal Reserve
from one US bank to another
;
(1) the higher the federal funds rate, the more expensive it is to borrow money;
(2) since it is only applicable to very creditworthy institutions f
Federal funds
overnight borrowings between US banks
to maintain their bank reserves at the Federal Reserve;
(1) banks keep reserves at Federal Reserve Banks to meet their reserve requirements and to clear financial transactions;
(2) transactions in the federal funds ma
Discount rate
the interest rate on overnight loans of reserves kept at the Federal Reserve
from the Federal Reserve to other banks
;
(1) the discount loans are intended to reduce liquidity problems and the pressures of reserve requirements: it allows the federal reserv
Eurodollar market
the European market where US dollars can be
deposited and loaned for short periods of time
;
(1) in this market, loans are made in the form of Eurodollars and products are denominated in the US currency;
(2) however, because transactions are typically $1
LIBOR rate
the average interest rate at which major banks
offer to lend Eurocurrency deposits to other banks
;
(1) more specifically, it is the interest rate at which banks offer to lend funds to one another in the international interbank market
how it works:
(1) ev
LIBID rate
the average interest rate at which major banks
bid to borrow Eurocurrency deposits from other banks
;
(1) unlike LIBOR, which is determined by the average interest rate which banks are willing to lend eurocurrency deposits, LIBID refers to the rate which
Tapering
a gradual
winding down of central bank activities
such as asset-purchasing programs;
(1) tapering activities is primarily aimed at interest rates and investor expectations of what those rates will be in the future;
(2) these can include conventional centr
Quantitative easing
a central bank asset-purchasing program in which the bank
buys a specified amount of financial assets (securities) from commercial banks and other private institutions
- thus raising the prices of those financial assets, lowering their yield and simultane
Interbank lending market
a market in which banks
extend overnight loans to each other
at the interbank rate;
(1) banks are required to hold an adequate amount of liquid assets, such as cash, to manage any potential bank runs by clients;
(2) if a bank cannot meet these liquidity r
Eurocurrencies
foreign currencies deposited in banks
outside the home country
;
(1) eurocurrencies are a variant of Eurobonds in that these short-term deposits earn interest similarly to short-term Eurobonds
Eurodollars
US dollars deposited in foreign banks
outside the United States
or in
foreign branches of US banks
;
(1) because these short-term deposits earn interest, they are similar to short-term Eurobonds;
(2) American banks borrow Eurodollar deposits from other ba
Foreign bonds
bonds sold in a
foreign country denominated in that country's currency
;
(1) Porsche selling a bond in the US denominated in dollars;
(2) a large percentage of US railroads built in the 19th century were financed by sales of foreign bonds in Britain
Eurobonds
bonds
denominated in a currency other than that of the country in which it is sold
;
(1) a company selling a bond denominated in U.S. dollars sold in London
(2) a bond denominated in euros is called a Eurobond only if it is sold outside the countries that