As the Federal Reserve continues to pare back its stimulus and the U.S. Treasury issues bills at a higher rate, short-term borrowing costs have surged.

The spread between the three-month dollar Libor, or London interbank offered rate, and the three-month overnight indexed swap rates rose as much as 60.3 basis points Tuesday, March 27, to the highest the spread has reached since May 2009, according to data from Reuters.

Libor is closely monitored as a measure of short-term borrowing costs and financial duress, as it serves as a benchmark gauge for trillions of dollars worth of loans and other financial products.

Libor -- 3 mo. USD (Source: FactSet)

The rapid increase in the spread has been attributed to several factors including Fed policy, Treasury issuance and the late-2017 Tax Cuts and Jobs Act, which resulted in a significant influx of repatriated cash from overseas.

While the Libor has risen steadily for the past year, it's important to note that the rally hasn't reached 2008 levels. During the global financial crisis, a soaring Libor illustrated the significant reluctance of worldwide banks to lend to one another. That was, at the time, indicative of measured stress on financial markets that was a harbinger of escalated fear to come.

The Libor rose recently in 2016 as a result of changing money market reforms. 

As the Libor rose on Tuesday, U.S. equities suffered losses. By the morning of Wednesday, March 28, stocks opened mostly higher. 

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