Bloomberg News

European Banks’ Dollar Funding Costs Decline for Third Day

June 21, 2012

The cost for European banks to borrow in dollars fell for the third day, according to a money- markets indicator.

The three-month cross-currency basis swap, the rate banks pay to convert euro interest payments into dollars, was 50 basis points below the euro interbank offered rate at 2 p.m. in London, from minus 51 yesterday, according to data compiled by Bloomberg. That’s the cheapest level since June 15.

The one-year basis swap was 50 basis points below Euribor from minus 49 yesterday. A basis point is 0.01 percentage point.

Three-month Euribor, the rate banks say they pay for loans over that period in euros, fell to 0.655 percent from 0.657 the day before. The rate has fallen since June 14 toward the record low of 0.634 percent reached on March 31, 2010.

One-week Euribor rose to 0.325 percent from 0.322 percent. Euribor is derived from a survey of panel banks and published at around 9 a.m. daily by the European Banking Federation.

Prices in the forward market for three-month Euribor relative to a gauge of overnight borrowing costs or overnight indexed swaps -- known as the FRA/OIS spread -- were 30 basis points from 31.5 yesterday.

The Euribor/OIS spread was little changed at 43 basis points .

Lenders increased overnight deposits at the Frankfurt- based European Central Bank yesterday, placing 780 billion euros ($989 billion) from 764 billion euros the day before.

The London interbank offered rate, or Libor, for three- month dollar loans was unchanged for the twelfth day at 0.468 percent. Libor, which acts as a benchmark for about $360 trillion of financial instruments worldwide, is published by the British Bankers’ Association.

Three-month Euribor USD, a gauge of dollar funding costs from the Brussels-based EBF, was unchanged at 0.948 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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