Bloomberg News

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

April 10, 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 41 basis points at 9:22 a.m. in London from 42 yesterday, data compiled by Bloomberg show. The measure, which started the year at 95 basis points, is the lowest since Aug. 1.

The cost for banks to convert euro interest payments into dollars rose. The three-month cross-currency basis swap was 55 basis points below Euribor from 54 basis points on April 5. The cost reached an eight-month low of minus 49.5 on March 26.

The one-year basis swap was 53.5 basis points less than Euribor from 51 basis points on April 5. A basis point is 0.01 percentage point.

Lenders increased overnight deposits at the European Central Bank on April 5, placing 785 billion euros ($1 trillion) with the Frankfurt-based bank, up from 773 billion euros the day before.

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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