November 1, 2018 / 1:22 PM / 6 months ago

MONEY MARKETS-Dollar Libor posts biggest one-day jump since March

(Updates with fed funds data)

NEW YORK, Nov 1 (Reuters) - A key measure on what banks charge each other to borrow three-month dollars registered its largest one-day gain since mid-March, as the U.S. government’s growing debt load and the Federal Reserve’s shrinking balance sheet have ratcheted up private borrowing costs.

The London interbank offered rate to borrow three-month dollars rose 2.3 basis points to 2.5815 percent, the highest since October 2008. This was the biggest daily increase since a near 2.6 basis points rise on March 20.

LIBOR is the rate benchmark for $200 trillion of dollar-denominated financial products, mainly interest rate swaps and floating-rate loans.

In October, LIBOR surged 16.0 basis points, which was the biggest increase since a 29.5 basis-point jump seven months ago.

Other U.S. money market rates also climbed last month on expectations the Fed would hike short-term rates further as labor conditions remain tight and inflation is approaching its 2-percent goal.

The federal funds rate averaged 2.20 percent on Wednesday for a seventh straight session, according to New York Federal Reserve data released on Thursday.

The “effective” fed funds rate is the average cost of what banks charge each other to borrow excess reserves overnight.

The effective fed funds rate and the interest the Fed pays banks on excess reserves that they leave with the U.S. central bank (IOER) remained at parity.

The U.S. central bank has been controlling these two rates to conduct its monetary policy. (Reporting by Richard Leong Editing by Susan Thomas and Nick Zieminski)

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