Bloomberg News

Banks’ Reluctance to Lend to Each Other Declines to 9-Month Low

May 11, 2012

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

The Euribor-OIS spread, the difference between the euro interbank offered rate and overnight indexed swaps, was 37 basis points at 8:18 a.m. in London from 38 yesterday, data compiled by Bloomberg show. The measure fell for the third day to the lowest level since Aug. 1. It is the fourth week the measure has declined.

The cost for banks to convert euro interest payments into dollars rose. The three-month cross-currency basis swap was 45 basis points below Euribor from 44 yesterday. It is the first week the measure has risen after a four-week decline.

The one-year basis swap rose to 54 basis points less than Euribor from minus 53.5 yesterday. A basis point is 0.01 percentage point.

Lenders increased overnight deposits at the Frankfurt-based European Central Bank yesterday, placing 703 billion euros ($908 billion) with the European Central Bank from 696 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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