Banks’ Dollar Funding Costs Decline to One-Week Low in Europe

The cost for banks to convert euro interest payments into dollars fell for the second day to the cheapest level in a week, according to a money-market indicator.

The three-month cross-currency basis swap was 52 basis points below the euro interbank offered rate at 8:40 a.m. in London from minus 55 yesterday, data compiled by Bloomberg show. The measure reached minus 57 on April 10, the most expensive since March 19.

The one-year basis swap was 54 basis points below Euribor from minus 56, the highest cost since March 2. A basis point is 0.01 percentage point.

European banks’ reluctance to lend to one another was little changed with the Euribor-OIS spread, the difference between the borrowing benchmark and overnight indexed swaps, at 41 basis points. The measure reached an eight-month low at 40 basis points on April 10.

Lenders cut overnight deposits at the European Central Bank yesterday, placing 653 billion euros ($858 billion) with the Frankfurt-based bank, up from 788 billion euros on April 10.

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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