Bloomberg News

Interbank Lending Stress in Europe Holds at Lowest in 13 Months

August 24, 2012

European banks’ reluctance to lend to one another held at the lowest level in more than 13 months, according to a money-market indicator.

The difference between the euro interbank offered rate and overnight indexed swaps, known as the Euribor-OIS spread, was 23.6 basis points at 8:20 a.m. in London, according to data compiled by Bloomberg. That’s the tightest since July 7, 2011.

The cost for banks to convert euro interest payments into dollars held near the lowest since July 22, 2011. The three- month cross-currency basis swap was 33.5 basis points below Euribor from as low as minus 31.5 yesterday.

The one-year basis swap was little changed at 36 basis points less than Euribor. A basis point is 0.01 percentage point.

An estimate of future average overnight borrowing costs in euros, the three-month Eonia swap, was unchanged at 6.8 basis points. The European Banking Federation’s euro overnight indexed average, or Eonia, of unsecured lending deals was set at 0.108 percent yesterday from 0.103 percent the day before.

Lenders cut overnight deposits at the Frankfurt-based European Central Bank yesterday, placing 330 billion euros ($414 billion) with the bank from 336 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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