Functionally, the two assets are the same to John, but while John's deposit at Chase was a demand deposit, his deposit at Citibank in London is a
Eurodollar deposit.
It is surely significant that the
Eurodollar deposit market emerged in the 1960s when the Soviet Foreign Trade Bank deposited its surplus dollars in London and Paris bank to prevent Cold Warasset sequesters.
domestic deposit rates are lower than comparable maturity
Eurodollar deposit rates because domestic time deposits are subject to Federal Reserve Bank reserve requirements and Federal Deposit Insurance Corporation (FDIC) fees and
Eurodollar deposits are not.
Figure 2 focuses on the difference between the yield on a three-month eurodollar futures contract with three months to maturity and the actual
eurodollar deposit yield.
Such a Finding would be consistent with a higher premium on
eurodollar deposit yields relative to Treasury securities.
dollar deposited in a bank's Grand Cayman branch is a
eurodollar deposit.
The creation of a
Eurodollar deposit may be illustrated best by a streamlined example:(14) IBM Corporation decides to transfer $1 million out of its account at Chase Manhattan Bank in New York and deposit the funds with Barclays Bank in London, to take advantage of the higher interest rate offered on Eurodollar accounts.
Eurodollar deposit rates are the rates paid on large deposits of dollars in foreign banks.
The Treasury-to-eurodollar (TED) spread compares the yield on three-month T-bills with three-month
eurodollar deposit rates.
Treasury bills, the biggest investment after money funds, hold just 5% of short-term funds, while 4% is in commercial paper and 3% each in
Eurodollar deposits and separately managed accounts (SMAs).
Examining current rates, all but those for
Eurodollar deposits are now below 15 basis points.
