The central bank will pay an interest rate set to the sum of the interest rate paid on excess reserves plus a fixed spread of 1 basis point on the deposits.
The Fed currently pays an interest rate of 25 basis points on excess reserves. These floating rate term deposits will settle on Thursday, May 21, and mature on June 4.
The term deposit facility is one of the tools the Fed has said it will use to reduce cash in the banking system to achieve its interest rate target.