NEW YORK, Feb 5 (Reuters) - The Federal Reserve said on Thursday it awarded $188.08 billion of 21-day term deposits to 87 banks at an auction held earlier.
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 3 basis points on the deposits.
The Fed currently pays an interest rate of 25 basis points on excess reserves.
These deposits will settle on Thursday and mature on Feb. 26.
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.
The next two TDF operations are scheduled for Feb. 12 and Feb. 19, the Fed said on Monday. (Reporting by Richard Leong; Editing by Chizu Nomiyama)