How does the deposit-loan rate spread out into the Eurodollar market compare to the deposit-loan rate spread out in the domestic U.S. banking system? Why?
The deposit-loan spread out in the Eurodollar market is narrower than in the domestic U.S. banking system. i.e., in the Eurodollar market the deposit rate is higher than the deposit rate of dollars in the U.S. banking system & the lending rate is less. The Eurodollar market can operate at a lower cost than can the U.S. banking system since it is not subject to Federal Reserve Bank reserve needs on deposits or FDIC deposit insurance.