Feb. 15 (Bloomberg) -- The cost for European banks to borrow in dollars declined as funding from the region’s policy makers continues to ease borrowing costs, 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 69.5 basis points below the euro interbank offered rate from minus 72 yesterday, data compiled by Bloomberg show. The measure was minus 68 on Feb. 13, the lowest cost in six months.
Since the European Central Bank injected 489 billion euros ($639 billion) into the financial system, borrowing costs have been driven lower. The Frankfurt-based ECB will hold a second so-called longer-term refinancing operation later this month.
“The first three-year LTRO helped avert what could have potentially been a second credit crunch,” said Brian Barry, an analyst at Investec Bank Plc in London. “It has had a clearly visible impact on banks’ ability to fund.”
The one-year basis swap was 61 basis points less than Euribor, from minus 63 yesterday. A basis point is 0.01 percentage point.
The Euribor-OIS spread, the difference between Euribor and overnight indexed swaps, was little changed at 70 basis points at 10:10 a.m. in London, the lowest level in four months, data compiled by Bloomberg show.
Lenders increased overnight deposits at the ECB for the fourth day yesterday, placing 524 billion euros with the Frankfurt-based central bank, up from 510 billion euros on Feb. 13.
Three-month Euribor, the rate banks say they pay for three- month loans in euros, declined for the 40th day to 1.045 percent, from 1.051 percent. It’s the longest run of drops in 2 1/2 years. One-week Euribor rose for the first time since Dec. 22 to 0.372 percent from 0.371 percent.
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