Bloomberg News

Overnight Rate Swaps Decline for Fourth Month in Money Markets

July 31, 2012

An estimate of future average overnight borrowing costs in euros fell for the fourth month to hold near a record, according to a money-market indicator.

The three-month Eonia OIS swap fell 17.6 basis points this month to 5.5 at 8:48 a.m. in London, according to data compiled by Bloomberg. The measure has dropped 16 basis points since the European Central Bank cut its deposit rate to zero on July 5.

The European Banking Federation’s euro overnight indexed average, or Eonia, of unsecured lending transactions, was set at 11.2 basis points yesterday from a record 11.1 the day before.

The cost for European banks to borrow in dollars declined. The three-month cross-currency basis swap, the rate banks pay to convert euro interest payments into the U.S. currency, was 42 basis points below the euro interbank offered rate, or Euribor, from minus 45 yesterday.

The one-year basis swap was 45 basis points, or 0.45 percentage point, below Euribor from minus 46. Euribor is the rate banks say they see each other lending in euros, according to the same panel of banks that contribute to Eonia.

Three-month Euribor fell to a record low 0.401 percent yesterday from 0.415 on July 27.

Banks cut overnight deposits at the Frankfurt-based European Central Bank yesterday to 336 billion euros ($412 billion) from 337 billion euros on July 27.

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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