Bloomberg News

European Banks’ Dollar Funding Costs Decline in Money Markets

November 02, 2011

Nov. 2 (Bloomberg) -- The cost for European banks to fund in dollars fell from a four-week high, according to money markets indicators.

The one-year basis swap, the rate banks pay to convert euro payments into dollars, was 69 basis points below the euro interbank offered rate at 8:15 a.m. in London from minus 73 yesterday when funding costs reached the highest since Oct. 4, according to data compiled by Bloomberg.

The three-month cross-currency basis swap was 104 basis points under Euribor from minus 109 yesterday. A basis point is 0.01 percentage point.

A measure of banks’ reluctance to lend to one another in Europe rose to a five-week high. The Euribor-OIS spread, the difference between the borrowing benchmark and overnight index swaps, increased one basis point to 87 basis points. That’s the highest since Sept. 26 and compares with 89 on Sept. 23, when the measure was its widest since March 2009.

Lenders increased overnight deposits at the European Central Bank. Banks parked 229 billion euros ($316 billion) at the Frankfurt-based ECB yesterday, from 217 billion euros on Oct. 31. That compares with a year-to-date average of 67 billion euros.

--Editors: Andrew Reierson, Michael Shanahan

To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net

To contact the editors responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net;


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