Bloomberg News

European Banks’ Dollar Funding Costs Rise From Nine-Month Low

May 03, 2012

The cost for European banks to borrow in dollars rose from the lowest in nine 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 44 basis points below the euro interbank offered rate at 12 p.m. in London, data compiled by Bloomberg show. The measure was minus 43.5 yesterday, the cheapest level since July 28.

The one-year basis swap was 50.5 basis points less than Euribor from minus 51 yesterday. A basis point is 0.01 percentage point.

A measure of banks’ reluctance to lend to one another held near a nine-month low. The Euribor-OIS spread, the difference between the borrowing benchmark and overnight indexed swaps, was little changed at 39 basis points.

Lenders increased overnight deposits at the Frankfurt-based European Central Bank yesterday, placing 803 billion euros ($1 trillion) with the ECB from 789 billion euros on April 30.

Three-month Euribor, the rate banks say they pay for three- month loans in euros, fell to 0.70 percent from 0.704 percent. One-week Euribor rose to 0.317 percent from 0.316 percent.

The London interbank offered rate, or Libor, for three- month dollar loans was unchanged for the fourteenth day at 0.466 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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