Money market us fed funds rate falls for 1st time in a month

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NEW YORK, Sept 28 A key short-term U.S. interest rate fell for the first time in nearly a month on Friday as investors put more cash into the banking system in advance of the end of the third quarter. The federal funds rate, or the overnight cost for banks' to borrow each other's excess reserves, averaged 0.13 percent on Friday, down from 0.14 percent on Thursday, according to Federal Reserve data released on Monday. The fed funds rate, which the Fed targets to achieve its interest rate policy, had averaged 0.14 percent since Sept. 1. Banks tend to build up their cash holdings near quarter-end to meet capital requirements, while mutual funds often hold more cash in anticipation of a pickup in redemptions. Not all quarter-end cash sits in bank accounts. Some ends up in money market funds, which invest some of the money in Treasury bills and repurchase agreements. In the $5 trillion repo market, the overnight interest rate was last bid at 0.08 percent, the lowest in two weeks and down from 0.18 percent on Friday, according to ICAP. Interest rates on ultra short-term T-bills remained in negative territory on the open market, suggesting investors were willing to pay a premium to own these securities.

Interest rates on T-bills that will mature on Thursday through Nov. 5 were quoted at -0.0075 to -0.0275 percent, Tradeweb data showed. Worries about the global economy have intensified the demand for low-risk, cash-equivalent investments. Wall Street stumbled on Monday with the Standard & Poor's 500 index losing 2.4 percent in U.S. afternoon trading.