Bloomberg News

Dollar Funding Costs Rise for a Fifth Day in Euro Money Markets

December 14, 2011

Dec. 14 (Bloomberg) -- The cost for European banks to borrow in dollars rose for a fifth day to the highest in two weeks, according to money-market indicators.

The three-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, was 147 basis points below the euro interbank offered rate at 12:46 p.m. in London, from 141 basis points yesterday. The gap has widened by 38 basis points since the European Central Bank cut its main interest rate on Dec. 8.

The one-year basis swap was 106 basis points under Euribor, the widest since December 2008, data compiled by Bloomberg show. The spread was minus 97 yesterday. 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 little changed from yesterday at 95 basis points.

Overnight deposits fell at the European Central Bank. Lenders placed 140 billion euros with the Frankfurt-based ECB yesterday, down from 346 billion euros on Dec. 12. That’s the lowest amount since Nov. 7.

Three-month Euribor, the rate banks say they pay for three- month loans in euros, fell to 1.423 percent from 1.426 percent yesterday. One-week Euribor fell to 0.767 percent from 0.787 percent yesterday.

The dollar London interbank offered rate, or Libor, for three-month dollar loans rose to 0.555 percent from 0.546 percent yesterday.

--Editors: Andrew Reierson, Paul Armstrong

To contact the reporter on this story: Namitha Jagadeesh in London at

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

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