Bloomberg News

Dollar Funding Costs Rise to 3-Year High in Euro Money Markets

November 25, 2011

Nov. 25 (Bloomberg) -- The cost for European banks to fund in dollars rose to a three year high, according to money-market indicators.

The three-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, was 145 basis points below the euro interbank offered rate at 8:44 a.m. in London, from minus 143 yesterday. That’s the most expensive since December 2008.

The one-year basis swap was 98 basis points under Euribor, the biggest gap in three years, from minus 93 yesterday, data compiled by Bloomberg show. A basis point is 0.01 percentage point.

A measure of banks’ reluctance to lend to one another in Europe rose. The Euribor-OIS spread, the difference between the borrowing benchmark and overnight index swaps, was 93 basis points from 92 yesterday. The difference was 98 basis points on Nov. 3, the widest since March 2009.

Lenders increased overnight deposits at the European Central Bank, placing 237 billion euros ($316 billion) with the Frankfurt-based ECB yesterday, up from 237 billion euros on Nov. 23. That compares with a year-to-date average of 78 billion euros.

--Editors: Andrew Reierson, Michael Shanahan

To contact the reporter on this story: David Goodman in London at

To contact the editor responsible for this story: Paul Armstrong at

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