(Reuters) - The rate banks charge each other to borrow dollars for three months fell by the most in nearly four months on Tuesday, following a broad pullback in benchmark bond yields the day before on worry over U.S. President Donald Trump’s tough stance on trade.
The London interbank offered rate, or Libor, for three-month dollars USD3MFSR= was fixed at 1.03178 percent from 1.03789 percent on Monday, declining for a second straight day and by the most since Sept. 28.
The rate has declined by 1.333 basis points since peaking Friday at the highest since April 2009. Libor breached 1 percent earlier this month after more than seven-and-a-half-years below that mark. Traders expect Trump’s economic policies will accelerate economic growth and inflation.
Many investors have begun recently to reassess those expectations amid actions by the new administration to restrict trade and with few details yet available about proposed tax cuts, infrastructure spending and deregulation.
On Monday, U.S. Treasury yields declined on a safe-haven bid after Trump told U.S. manufacturing executives he would impose a hefty border tax on companies that import products to the United States after moving American factories overseas.
The 2-year yield, which is most sensitive to expectations of U.S. Federal Reserve monetary policy expectations, ended the session lower than where it was on the day before the Fed raised interest rates in December.
Reporting by Dan Burns in New York; Editing by Jeffrey Benkoe