Bloomberg News

Banks’ Reluctance to Lend to Each Other Falls to Three-Month Low

February 01, 2012

Feb. 1 (Bloomberg) -- A measure of banks’ reluctance to lend to one another declined for an eighth day to the lowest in more than three months, money markets show.

The Euribor-OIS spread, the difference between the euro interbank offered rate and overnight index swaps, fell to 75.8 basis points at 12:25 p.m. in London, according to data compiled by Bloomberg. That’s the lowest since Oct. 21 and compares with 76 yesterday. The measure has declined every day since Jan. 20, when it was at 85 basis points.

The three-month cross-currency basis swap, the rate banks pay to convert euro interest payments into dollars, was 70.5 basis points below Euribor, from minus 74 yesterday. A basis point is 0.01 percentage point.

The one-year basis swap was at 61 basis points less than Euribor. That’s the smallest gap since Sept. 8. and compares with minus 62 yesterday.

Lenders reduced overnight deposits at the European Central Bank for the second consecutive day, placing 472 billion euros ($620 billion) with the Frankfurt-based ECB yesterday from 479 billion euros on Jan. 30.

Three-month Euribor, the rate banks say they pay for three- month loans in euros, fell for a 30th day to 1.115 percent from 1.125 percent. One-week Euribor declined to 0.396 percent from 0.401 percent.

The London interbank offered rate, or Libor, for three- month dollar loans fell to 0.537 percent from 0.542 percent.

--Editor: Andrew Reierson

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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