Bloomberg News

Dollar One-Year Funding Costs Fall, European Money Markets Show

December 28, 2011

Dec. 27 (Bloomberg) -- The cost for European banks to borrow in dollars for a year declined, according to a money markets indicator.

The one-year cross-currency basis swap, the rate banks pay to convert euro interest payments into dollars, was 97 basis points below the euro interbank offered rate at 12:45 p.m. in London, compared with minus 98 basis points yesterday, data compiled by Bloomberg show.

The rate was 106.5 basis points under Euribor on Dec. 14, the most expensive since December 2008. The cost has increased from minus 49 basis points at the end of last year.

The three-month basis swap was little changed at 127 basis points under Euribor. 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 at 99 basis points from 97 yesterday. It was at 101 basis points on Dec. 1, the biggest gap since January 2009.

Euribor for three months was set at 1.396 percent, down from 1.404 percent, according to the European Banking Federation.

Lenders increased overnight deposits at the European Central Bank, placing 347 billion euros ($454 billion) with the Frankfurt-based bank on Dec. 22, the most since June 2010 and up from 265 billion euros the previous day.

--Editor: 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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