NEW YORK — A sharp jump in fed funds levels prompted the Federal Reserve Bank of New York to inject additional liquidity in money markets in an unusual second-round intervention.

The U.S. central bank's move comes as its peers around the developed world took action to ensure their domestic money markets had sufficient liquidity and to rein in domestic money market rates.

The Fed's overnight repurchase agreement is technical in nature, and exists simply to tweak liquidity levels. But it was unusual in that it followed a $20 billion overnight repo transaction that came at the central bank's typical intervention time of around 9:30 a.m. ET.

The Fed accepted $50 billion in overnight repos, driving traded fed funds to 4.25% from a high of 6.5% ahead of the Fed's action. Fed funds were last traded at 3.50%, according to Tullett data.

Wrightson ICAP analysts had expected a liquidity injection of $14 billion from the New York Fed Monday.

The reason to come in again was simple. Market participants said the broad-based uncertainty resulting from the fallout of Lehman Brothers Holdings Inc.'s bankruptcy had driven up short-term funding costs as banks scrambled for cash.

The Fed's official target for the funds rate — it's a market based rate on what banks charge to lend each other reserves — is currently set at 2%.

While the funds rate is ultimately set by market forces, the difference between where it was trading and the Fed's target was unusually big, hence the reaction. The Fed funds rate is the central bank's primary tool in influencing the overall course of the economy.

Earlier, the European Central Bank, the Bank of England, the Reserve Bank of Australia, the Canadian central bank and the Swiss National Bank all injected liquidity into markets as banks scrambled to get their hands on cash in the wake of the weekend's tumultous events. Besides the failure of Lehman, Merrill Lynch & Co. sought safety in a takeover by Bank of America Corp. Insurance group American International Group is planning a wholesale restructuring.

This concerted round of action is reminiscent of the events of late last year, when sharp rises in money market rates prompted similar rounds of liquidity injections.

The ECB injected $30 billion in funds Monday, a much smaller amount than at the start of the credit crunch, when it injected EUR95 billion in one session alone. The Canadian central bank had by midday added liquidity in three rounds for a record C$2.31 billion.

The Fed's operations Monday weren't a record. Larger operations were done in the wake of the Sept. 11, 2001 terror attacks.

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