Bloomberg News

Overnight Rate Swap Drops to Record Low in European Money Market

August 01, 2012

An estimate of future average overnight borrowing costs in euros fell to a record low, according to a money-market indicator.

The three-month Eonia OIS swap dropped to 5.4 basis points at 8:48 a.m. in London from 5.6 yesterday, according to data compiled by Bloomberg. The European Banking Federation’s euro overnight indexed average, or Eonia, of unsecured lending transactions was set at a record 11.1 basis points yesterday.

The cost for European banks to borrow in dollars fell to the lowest since July 27, 2011. The three-month cross-currency basis swap, the rate banks pay to convert euro interest payments into the U.S. currency, was 41 basis points below the euro interbank offered rate, or Euribor, from minus 42 yesterday. The measure reached as low as minus 39 on July 30.

The one-year basis swap was 44 basis points, or 0.44 percentage point, below Euribor from minus 43. Euribor is the rate banks say they see each other lending in euros, according to the same panel of banks that contribute to Eonia.

Banks increased overnight deposits at the Frankfurt-based European Central Bank to 337 billion euros ($415 billion) yesterday from 336 billion euros the day before.

Three-month Euribor fell to a record 0.389 percent yesterday from 0.401 the day before. The London interbank offered rate, or Libor, for three-month dollar loans declined to 0.443 percent yesterday from 0.445 percent, the lowest since Nov. 7. Libor is published by the British Bankers’ Association.

To contact the reporter on this story: Katie Linsell in London at

To contact the editor responsible for this story: Paul Armstrong at

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