Dollar Funding Costs Rise for a Fifth Day in Euro Money Markets

The cost for European banks to borrow in dollars rose for a fifth day to the highest in two weeks, according to money-market indicators.

The three-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, was 147 basis points below the euro interbank offered rate at 9:44 a.m. in London, from 141 basis points yesterday. The gap has widened by 38 basis points since Dec. 8 when the European Central Bank cuts its main interest rate.

The one-year basis swap is 105 basis points under Euribor, matching the highest cost since December 2008, data compiled by Bloomberg show. The spread was minus 97 yesterday. A basis point is 0.01 percentage point.

A measure of banks’ reluctance to lend to one another in Europe rose. The Euribor-OIS spread, the difference between the borrowing benchmark and overnight index swaps, was at 96 basis points from 95 yesterday.

Lenders cut overnight deposits at the European Central Bank, placing 140 billion euros with the Frankfurt-based ECB yesterday from 346 billion euros on Dec. 12. That’s the lowest amount since Nov. 7.

To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net

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