Logo
Home  >  Overnight market

Overnight Market

The overnight market refers to the financial market where short-term borrowing and lending occur, typically for periods of one day. Banks, financial institutions, and other large entities use the overnight market to manage liquidity and meet short-term funding needs. Overnight rates are the interest rates charged for borrowing funds overnight, and these rates are influenced by central bank policies and interbank lending conditions.

Example

A bank borrows funds in the overnight market to meet its short-term liquidity requirements, paying an overnight interest rate set by market conditions.

Key points

• A market for short-term borrowing and lending, typically for one day.

• Used by financial institutions to manage liquidity and meet short-term funding needs.

• Overnight rates are influenced by central bank policies and interbank lending conditions.

Quick Answers to Curious Questions

Banks use the overnight market to manage short-term liquidity needs, ensuring they have enough cash to meet regulatory requirements.

Overnight rates are influenced by central bank policies and the supply and demand for funds in the interbank market.

It helps maintain liquidity and stability in the banking system by providing a mechanism for short-term borrowing and lending.
share facebook share email share linkedin share pinterest share
scroll top

Register to our Newsletter to always be updated of our latest news!