NEW YORK (Reuters) - The interest that U.S. banks charge each other to borrow reserves rose for the first time in nearly three weeks, while other money market rates broadly increased, according to New York Federal Reserve data released on Thursday.
The average, or effective, federal funds rate had fallen after the Fed’s adjustment earlier this month on what it pays banks on excess reserves (IOER).
The effective fed funds rate increased to 2.40% on Wednesday, up from 2.38% the day before, while its premium over IOER rose to 5 basis points from 3 basis points on Tuesday.
The increase in borrowing costs likely stemmed from investors paying for the $84 billion in Treasury supply at last week’s quarterly refunding, which settled on Wednesday.
Reporting by Richard Leong