Euro Feds

Posted in Finance, Accounting and Economics Terms, Total Reads: 576
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Definition: Euro Feds

Euro Feds are overnight advances of Eurodollars between US based banks, transmitted through federal wire. This transmission happens from a foreign branch of one US bank with excess funds to another US bank with insufficient reserves. Usually Eurodollar settlement in London is done through Clearing House Interbank Payment system (CHIPS) while transactions in New York are done through Fed wires.


However there may be cases in which a bank with excess reserve may find a deposit of euro dollar in Euro market more attractive than buying or selling Federal funds. Hence the rate of overnight Euros are closely related to Federal funds.

 

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