Bloomberg News

Dollar Funding Costs Fall to Two-Week Low in Euro Money Markets

November 29, 2012

The cost for European banks to borrow in dollars fell to the lowest in more than two weeks, 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 26 basis points below the euro interbank offered rate at 8:25 a.m. from minus 27.5 yesterday, according to data compiled by Bloomberg. The measure is the lowest since Nov. 12.

The one-year basis swap was 28 basis points below Euribor from minus 29 yesterday. A basis point is 0.01 percentage point.

A measure of European banks’ reluctance to make unsecured loans to one another was little changed. The difference between Euribor and overnight index swaps, known as the Euribor-OIS spread, was 12.4 basis points, down from 12.75 on Nov. 23, the highest since the start of October.

The European Banking Federation’s euro overnight index average, or Eonia, of unsecured lending deals was set at 0.073 percent yesterday from 0.072 percent the day before. The Eonia swap, an estimate of average overnight borrowing costs over the next three months, was little changed at 6.3 basis points.

Lenders increased overnight deposits at the European Central Bank yesterday to 245 billion euros ($318 billion) from 242 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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