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European Banks’ Dollar Funding Costs Fall to Nine-Month Low

The cost for European banks to borrow in dollars fell for the third day to the lowest in nine months, according to a money-market indicator.

The three-month cross-currency basis swap, the rate banks pay to convert euro interest payments into dollars, was 43 basis points below the euro interbank offered rate at 8:18 a.m. in London from minus 44 yesterday, data compiled by Bloomberg show. The measure, which started the year at 114 basis points, is the cheapest level since July 28.

The one-year basis swap was unchanged at 52 basis points less than Euribor. A basis point is 0.01 percentage point.

A measure of banks’ reluctance to lend to one another was little changed near a nine-month low. The Euribor-OIS spread, the difference between the borrowing benchmark and overnight indexed swaps, was 39 basis points.

Lenders increased overnight deposits at the Frankfurt- based European Central Bank yesterday, placing 782 billion euros ($1 trillion) with the ECB from 759 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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