Bloomberg News

Banks’ Reluctance to Lend to Each Other Holds Near 8-Month Low

April 17, 2012

European banks’ reluctance to lend to one another held near the lowest level 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 40.5 basis points at 1:25 p.m. in London, compared with 41 yesterday, data compiled by Bloomberg show. The measure reached an eight- month low of 40 basis points on April 10.

The cost for banks to convert euro interest payments into dollars fell. The three-month cross-currency basis swap was 50 basis points below Euribor from minus 54 basis points yesterday. The cost reached an eight-month low of minus 49.5 on March 26.

The one-year basis swap was 56 basis points less than Euribor from minus 57 yesterday. A basis point is 0.01 percentage point.

Lenders increased overnight deposits at the European Central Bank on April 16, placing 745 billion euros ($977 billion) with the Frankfurt-based bank from 743 billion euros the day before.

Three-month Euribor, the rate banks say they pay for three- month loans in euros, fell to 0.746 percent from 0.750 percent. One-week Euribor was unchanged at 0.315 percent.

The London interbank offered rate, or Libor, for three- month dollar loans was unchanged at 0.466 percent.

Three-month dollar Euribor, a gauge of dollar funding costs started by the Brussels-based European Banking Federation on April 2, was unchanged at 0.972 percent.

The three-month euro FRA-OIS spread, the difference between floating-rate agreements and overnight indexed swaps, was 36 basis points from 37 basis points yesterday.

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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