NEW YORK: A key overnight borrowing cost for banks and Wall Street firms rose on Tuesday after falling to a 5-1/2 week low.
The interest rate on overnight repurchase agreements (repo) in which banks and bond dealers use Treasuries and other securities as collateral to raise cash to fund their trades was quoted at 0.10-0.13 percent, according to ICAP.
This compared with 0.07 percent late on Monday, which was the lowest closing level, ICAP data showed.
Monday's drop in the overnight rate occurred despite the Federal Reserve raising the interest rate it pays on its fixed-rate reverse repo program (RRP) to 0.07 percent from 0.03 percent.
The Fed has been testing its RRP program, which is a tool it will use to drain cash from the banking system when it decides to tighten monetary policy.
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