Bloomberg News

Dollar Funding Costs Hold at Two-Week High in Euro Money Market

December 20, 2012

The cost for European banks to borrow in dollars held at the highest in 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 25 basis points below the euro interbank offered rate at 8:45 a.m., according to data compiled by Bloomberg. The measure is the costliest since Dec. 7.

The one-year basis swap was little changed at 25 basis points below Euribor. A basis point is 0.01 percentage point.

A measure of European banks’ reluctance to make unsecured loans to one another rose to a four-day high. The difference between Euribor and overnight index swaps, known as the Euribor- OIS spread, was 12.1 basis points from 11.8 yesterday.

The European Banking Federation’s euro overnight index average, or Eonia, of unsecured lending deals was set at 0.07 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 6.2 basis points.

Lenders cut overnight deposits at the European Central Bank yesterday to 233 billion euros ($308 billion) from 239 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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