Overnight rate

Short description: Interest rate of overnight loans between banks

"Call rate" redirects here. It is not to be confused with Call handling rate.

Not to be confused with Overnight cost.

{| class="wikitable floatright" | width="250"

|- style="text-align:center;" |By jurisdiction |- |

* Federal funds rate (US Federal Reserve overnight rate)
* SOFR (Secured Overnight Financing Rate; calculated by the New York Fed)
* SELIC (Brazilian Real OverNight index rate)
* €STR (Euro Short Term Rate)
* SONIA (Sterling OverNight Index Average)
* SARON (Swiss Average Rate OverNight)
* TONAR (Tokyo Overnight Average Rate - Japanese Uncollateralised Overnight Call Rate)
* LIBOR (London Interbank Offered Rate - quotes in USD in London money market)
* EURIBOR (Euro Interbank Offered Rate)
* SHIBOR (Shanghai Interbank Offered Rate)
* ZARONIA (South African Rand Overnight Index Average)

|} The overnight rate is generally the interest rate that large banks use to borrow and lend from one another in the overnight market. In some countries (the United States, for example), the overnight rate may be the rate targeted by the central bank to influence monetary policy. In most countries, the central bank is also a participant on the overnight lending market, and will lend or borrow money to some group of banks.

There may be a published overnight rate that represents an average of the rates at which banks lend to each other; certain types of overnight operations may be limited to qualified banks. The precise name of the overnight rate will vary from country to country.

## Contents

* 1 Background
* 2 Measure of liquidity
* 3 See also
* 4 References

## Background

Throughout the course of a day, banks will transfer money to each other, to foreign banks, to large clients, and other counterparties on behalf of clients or on their own account. At the end of each working day, a bank may have a surplus or shortage of funds (or a shortage or excess reserves in fractional reserve banking). Banks that have surplus funds or excess reserves may lend them (often at a multiple of their legal reserve ratio, if any) or deposit them with other banks, who borrow from them. The overnight rate is the amount paid to the bank lending the funds.

Banks will also choose to borrow or lend for longer periods of time, depending on their projected needs and opportunities to use money elsewhere.

Most central banks will announce the overnight rate once a month. In Canada, for example, the Bank of Canada sets a target bandwidth for the overnight rate each month of +/- 0.25% around its target overnight rate: the Bank of Canada does not interfere in the overnight market so long as the overnight rate stays within its target band, but the Bank will use its reserves to lend or borrow in the overnight market to ensure that the overnight rate stays within its announced bandwidth.[1]

## Measure of liquidity

Overnight rates are a measure of the liquidity prevailing in the economy. In tight liquidity conditions, overnight rates shoot up. Overnight rates may also shoot up due to lack of confidence amongst banks, as was observed in the liquidity crunch of 2008.

In order to measure liquidity situation, the spread between risk-free rates and overnight rates is considered. The TED spread is a liquidity indicator for the U.S., which is the difference between LIBOR and Treasury bills.

## See also

* Bank rate
* Interbank lending market
* Overnight indexed swap

## References

1. ↑ Siklos, Pierre (2001). Money, Banking, and Financial Institutions: Canada in the Global Environment. Toronto: McGraw-Hill Ryerson. pp. 50–51. ISBN 0-07-087158-2.

* v
* t
* e

Federal Reserve System

* Federal Open Market Committee (FOMC)
* Chair
* Governors
* Federal Reserve Bank

Banknotes|

* Federal Reserve Note
* Federal Reserve Bank Note

Reports|

* Beige Book
* Federal Reserve Statistical Release
* Monetary Policy Report to the Congress
* Fedspeak

Federal funds|

* Discount window
* Federal funds
* Federal funds rate
* Primary dealer

History|

| Antecedents|

* Bank of Amsterdam (1614–1667)
* Bank of England (1694–1776)
* Currency Acts (1751; 1764)
* Second Continental Congress (1776–1781)
* Bank of North America (1781–1791)
* First Bank of the United States (1791–1811)
* Coinage Act of 1792
* Second Bank of the United States (1816–1836)
* Suffolk Bank (1818–1858)
* Suffolk System (1824–1858)
* Bank War (1832–1836)
* Coinage Act of 1834
* Independent U.S. Treasury (1846–1913)
* Coinage Act of 1849
* Coinage Act of 1853
* New York Clearing House Association (1853–1863)
* Coinage Act of 1857
* National Bank Acts (1863; 1864)
* Coinage Act of 1864
* Contraction Act of 1866
* Public Credit Act of 1869
* Currency Act of 1870
* Coinage Act of 1873
* Specie Payment Resumption Act (1875)
* Bland–Allison Act (1878)
* Sherman Silver Purchase Act (1890)
* Gold Standard Act (1900)
* Aldrich–Vreeland Act (1908)

|

Official|

* Federal Reserve Act (1913)
* Pittman Act (1918)
* Post–World War I recession (1918–1919)
* 1920–21 depression
* Roaring Twenties (1921–1929)
* Wall Street Crash of 1929
* Great Depression (1929–1933)
* Panic of 1930
* Gold Reserve Act (1934)
* 1937–38 recession
* Bretton Woods system (1944–1971)
* Post–World War II economic expansion (1945–1973)
* Employment Act of 1946
* 1949 recession
* U.S. Treasury Department Accord (1951)
* 1953 recession
* Bank Holding Company Act (1956)
* 1958 recession
* 1960–61 recession
* FOMC actions (1961–Present)
* Kennedy Slide of 1962
* 1969–70 recession
* Nixon shock (1971)
* Smithsonian Agreement (1971)
* 1973–74 stock market crash
* 1973–75 recession
* Federal Reserve Reform Act (1977)
* Humphrey–Hawkins Full Employment Act (1978)
* Early 1980s recession (1980; 1981–1982)
* DIDMC Act (1980)
* Federal Reserve v. Investment Co. Institute (1981)
* Great Moderation (1982–2007)
* Northeast Bancorp v. Federal Reserve (1985)
* Savings and loan crisis (1986–1995)
* Black Monday (1987)
* FIRRE Act (1989)
* Friday the 13th mini-crash (1989)
* Early 1990s recession (1990–1991)
* FDIC Improvement Act (1991)
* 1990s U.S. economic expansion (1991–2001)
* Dot-com bubble (1994–2004)
* 1997 mini-crash
* Gramm–Leach–Bliley Act (1999)
* Early 2000s recession (2001)
* 9/11 stock market crash (2001)
* 2002 stock market downturn
* U.S. housing market correction (2006–2007)
* 2007–2008 financial crisis
* 2007–2009 U.S. bear market
* Great Recession (2007–2009)
* Subprime mortgage crisis responses (2007–2010)
* Bloomberg v. Federal Reserve (2009)
* 2010 Flash Crash
* August 2011 stock markets fall
* 2015–16 stock market selloff

Chairs|

* Charles S. Hamlin (1914–1916)
* William P. G. Harding (1916–1922)
* Daniel R. Crissinger (1923–1927)
* Roy A. Young (1927–1930)
* Eugene Meyer (1930–1933)
* Eugene R. Black (1933–1934)
* Marriner S. Eccles (1934–1948)
* Thomas B. McCabe (1948–1951)
* William M. Martin (1951–1970)
* Arthur F. Burns (1970–1978)
* G. William Miller (1978–1979)
* Paul Volcker (1979–1987)
* Alan Greenspan (1987–2006)
* Ben Bernanke (2006–2014)
* Janet Yellen (2014–2018)
* Jerome Powell (2018–)

Current
governors|

* Jerome Powell (Chairman)
* Richard Clarida (Vice Chairman)
* Randal Quarles (Vice Chairman for Supervision)
* Lael Brainard
* Michelle Bowman
* 2 seats vacant

Current
presidents|

* Eric S. Rosengren (Boston)
* John C. Williams (New York)
* Patrick T. Harker (Philadelphia)
* Loretta J. Mester (Cleveland)
* Thomas Barkin (Richmond)
* Raphael Bostic (Atlanta)
* Charles L. Evans (Chicago)
* James B. Bullard (St. Louis)
* Neel Kashkari (Minneapolis)
* Esther George (Kansas City)
* Robert Steven Kaplan (Dallas)
* Mary C. Daly (San Francisco)

0.00

(0 votes)

Original source: https://en.wikipedia.org/wiki/Overnight rate. Read more

|

Retrieved from "https://handwiki.org/wiki/index.php?title=Finance:Overnight_rate&oldid=4114070"
*[v]: View this template
*[t]: Discuss this template
*[e]: Edit this template