Bloomberg News

Banks’ Dollar Funding Costs Fall to Lowest in a Week in Europe

June 22, 2012

The cost for European banks to borrow in dollars fell to the lowest in a week, 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 51 basis points below the euro interbank offered rate at 12:30 p.m. in London, from minus 54 yesterday, according to data compiled by Bloomberg. The measure is the cheapest level since June 15.

The one-year basis swap was at 51 basis points below Euribor from minus 51.5 yesterday. A basis point is 0.01 percentage point. Euribor is the rate banks say they see each other lending in euros derived from a survey of panel banks. It is published about 9 a.m. daily by the European Banking Federation in Brussels.

Three-month Euribor fell to 0.654 percent from 0.655 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 fell to 0.323 percent from 0.325 percent.

The Eonia-OIS swap, an estimate of average overnight borrowing costs over the next three months, was little changed at 22 basis points. The overnight indexed swap held below the European Central Bank’s deposit rate of 25 basis points for the fifth day.

Prices in the forward market for three-month Euribor relative to Eonia-OIS -- known as the FRA/OIS spread -- were at 28 basis points from 28.5 yesterday.

The Euribor/OIS spread was 43.5 at basis points from 43 yesterday.

ECB Deposits

Lenders cut overnight deposits at the Frankfurt-based ECB yesterday, placing 770 billion euros ($965 billion) from 780 billion euros the day before.

The London interbank offered rate, or Libor, for three- month dollar loans fell to 0.462 percent from 0.468 percent. The measure held at 0.468 for 13 days. 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, rose to 0.949 percent from 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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