Fed to open window for seven-day term deposits Aug. 22, continuing testing of facility

A floating-rate offering of term deposits with an early withdrawal feature through the Term Deposit Facility (TDF) will be offered Aug. 22, the Federal Reserve said Thursday – part of the central bank’s periodic testing of the facility.

The Fed said the Aug. 22 offering will be seven-day term deposits with a rate set equal to the sum of the interest rate paid on excess reserves plus a fixed spread of 1 basis point. The Fed said financial institutions participating can tender no more than $250 million. The operation window for the deposits, the central bank said, will be 10:30 a.m to 12:30 p.m. ET on Aug. 22. Awarded deposits will settle the same day the operation is executed, the Fed said.

Next week’s operation is part of the Fed’s previously announced periodic testing of the TDF. The Fed said the testing is aimed at “ensuring the operational readiness of the TDF and providing eligible institutions with an opportunity to maintain familiarity with term deposit procedures.”

As it has in the past, the Fed stressed that the TDF test operations are “a matter of prudent planning and have no implications for the near-term conduct of monetary policy.”

Federal Reserve to offer seven-day term deposits on August 22