March 4, 2019 / 2:24 PM / 7 months ago

MONEY MARKETS-LIBOR rises after biggest weekly drop since 2009

March 4 (Reuters) - A key gauge of interbank borrowing costs rose on Monday, rebounding from its steepest weekly decline since 2009 as money market rates rose late last week on hopes that China and the United States would reach a trade deal.

The London interbank offered rate (LIBOR) to borrow dollars for three months increased 0.91 basis point to 2.60763 percent. On Friday, it was 2.59850 percent, which was the lowest since Nov. 6.

Last week, three-month dollar LIBOR declined nearly 4.8 basis points, which was the biggest weekly fall since a 5.4-basis-point decline in July 2009.

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

In December, LIBOR reached its highest in more than decade at 2.82375 percent, propelled by U.S. Federal Reserve interest rate increases, rising U.S. government borrowing and a shrinking Fed balance sheet.

In late January, the Fed said it would be “patient” before ratcheting key lending rates higher. Fed Chairman Jerome Powell said the case for rate increases had “weakened” in recent weeks.

The U.S. central bank also signaled it was prepared to adjust the normalization of its balance sheet.

Meanwhile, the federal funds market traded at $93 billion on Friday, marking the heaviest one-day volume for that sector since June 6, 2018, New York Federal Reserve data showed on Monday.

Reporting by Richard Leong; editing by Jonathan Oatis

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