Bloomberg News

Banks’ Reluctance to Lend to Each Other Drops to Eight-Month Low

March 29, 2012

European banks’ reluctance to lend to one another fell to the lowest in eight months, according to a money-market indicator.

The Euribor-OIS spread, the difference between the euro interbank offered rate and overnight indexed swaps, was 42 basis points at 1:32 p.m. in London, data compiled by Bloomberg show. That’s the lowest since Aug. 3.

The cost for banks to convert euro interest payments into dollars rose for the second day. The three-month cross-currency basis swap was 51 basis points below Euribor from minus 50 yesterday.

The one-year basis swap 44 basis points less than Euribor, from minus 43 yesterday. A basis point is 0.01 percentage point.

Lenders increased overnight deposits at the ECB yesterday to 777 billion euros ($1 trillion), up from 774 billion euros on March 27.

Three-month Euribor, the rate banks say they pay for three- month loans in euros, fell to 0.783 percent from 0.787 percent. One-week Euribor fell to 0.317 percent from 0.320 percent.

The London interbank offered rate, or Libor, for three- month dollar loans fell to 0.468 percent from 0.470 percent.

To contact the reporter on this story: Katie Linsell in London at klinsell@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net


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