Fed lends $30 billion at 3.123%

The Federal Reserve made $30 billion in 28-day loans to banks at the lowest rate since it began holding special auctions last month to end the logjam in credit markets.

The 3.123% rate was the lowest of the four auctions conducted since mid-December. Demand from banks, as measured by the ratio of the volume of bids to the amount of money being auctioned, also was the lowest since the auctions began.

The Fed’s auctions are part of a coordinated effort with central banks in Britain, Canada, Switzerland and the euro region to increase temporary funds available for banks.

Declining money market rates suggest that central banks have been successful at restoring confidence after financial institutions incurred losses of more than $100 billion on mortgage-related debt.

The amount banks charge one another for three-month loans in dollars has dropped 0.81 of a percentage point to 3.24% since the last Fed auction. That rate, called the London interbank offered rate, or Libor, for three-month dollar loans hit a peak of 5.725% in September.