Bloomberg News

Cost of Swapping Euro Payments to Dollars Falls for Fourth Day

September 28, 2011

Sept. 28 (Bloomberg) -- The rate banks pay to convert euro interest payments into dollars fell for a fourth day to the lowest since Sept. 16, according to a money-markets indicator.

The one-year cross-currency basis swap declined to 66 basis points less than the euro interbank offered rate as of 4:30 p.m. in London, from 67 yesterday, according to data compiled by Bloomberg. The rate was 75 basis points under Euribor on Sept. 22, when it was the most expensive since December 2008.

The Euribor-OIS spread, the difference between three-month Euribor and overnight index swaps and a measure of banks’ reluctance to lend to one another, declined to 78 basis points from 80.5 yesterday, Bloomberg data show. The gap reached a 2 1/2-year high of 89 on Sept. 23.

The ECB said financial institutions decreased overnight deposits. Banks deposited 164 billion euros ($223 billion) with the Frankfurt-based lender yesterday, compared with 165 billion euros on Sept. 26 and 197.8 billion euros on Sept. 12, the ECB said.

Three-month Euribor -- the rate banks say they pay for three-month loans in euros -- increased to 1.544 percent from 1.537 percent yesterday. One-week Euribor rose to 1.228 percent from 1.211 percent.

The three-month dollar London interbank offered rate, or Libor, rose for a 14th day to 0.369 percent from 0.365 percent, according to the British Bankers’ Association. That’s the highest since Aug. 13, 2010.

The TED spread, or the difference between what lenders and the U.S. government pay to borrow for three months, was little changed at 36 basis points.

The three-month cross-currency basis swap was 100 basis points below Euribor, compared with 101 basis points yesterday. A basis point is 0.01 percentage point.

--With assistance from Abigail Moses in London. Editors: Andrew Reierson, Michael Shanahan

To contact the reporters on this story: Keith Jenkins in London at; David Goodman in London at

To contact the editors responsible for this story: Paul Armstrong at; Daniel Tilles at

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