Bloomberg News

Dollar Funding Costs Rise for Sixth Day in Euro Money Markets

November 30, 2011

Nov. 30 (Bloomberg) -- The cost for European banks to fund in dollars rose for a sixth day to the highest levels in three years, according to money-market indicators.

The three-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, was 159 basis points below the euro interbank offered rate at 8:25 a.m. in London, from minus 158 yesterday. The measure is the most expensive on a closing basis since October 2008.

The one-year basis swap was little changed at 105 basis points under Euribor, data compiled by Bloomberg show. A basis point is 0.01 percentage point.

The Euribor-OIS spread, a measure of banks’ reluctance to lend to one another in Europe, was little changed at 97 basis points. The spread, which is the difference between the borrowing benchmark and overnight index swaps, was 98 basis points on Nov. 3, the widest since March 2009.

Lenders increased overnight deposits at the European Central Bank, placing 297 billion euros ($394 billion) with the Frankfurt-based ECB yesterday, up from 281 billion euros on Nov. 28. That compares with a year-to-date average of 80 billion euros.

--Editors: Andrew Reierson, Michael Shanahan

To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net


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