Dollar Funding Costs Fall to Six-Month Low in Euro Money Markets
February 08, 2012, 9:43 AM ESTBy Katie Linsell
Feb. 8 (Bloomberg) -- The cost for European banks to borrow in dollars fell to the lowest in six months, according to a money-market indicator.
The three-month cross-currency basis swap, the rate banks pay to convert euro interest payments into dollars, was 68 basis points below the euro interbank offered rate at 8:35 a.m. in London, from minus 72 yesterday, data compiled by Bloomberg show. The cost is the lowest since Aug. 5.
The one-year basis swap was 57 basis points less than Euribor, the lowest since Sept. 2. It was minus 59 yesterday. A basis point is 0.01 percentage point.
A measure of European banks’ reluctance to lend to one another rose for the first day since Jan. 20. The Euribor-OIS spread, the difference between the borrowing benchmark and overnight indexed swaps, was 75 basis points in London, from 74 yesterday, according to data compiled by Bloomberg.
Lenders reduced overnight deposits at the European Central Bank, placing 495 billion euros ($657 billion) with the Frankfurt-based ECB yesterday from 503 billion euros on Feb. 6.
--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
