European Banks’ Dollar Funding Costs Decline to Two-Week Low

The cost for European banks to borrow in dollars fell to the lowest levels in more than two weeks, 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 44 basis points below the euro interbank offered rate at 8:45 a.m. in London compared with minus 48 on May 25, according to data compiled by Bloomberg. The cost is the cheapest since May 10.

The one-year basis swap was 62.5 basis points below Euribor from minus 63 on May 25. A basis point is 0.01 percentage point.

Prices in the forward market for three-month Euribor relative to overnight indexed swaps -- known as the FRA/OIS spread -- were little changed at 32 basis points.

The Euribor/OIS spread was at 39 basis points from 40 on May 25.

Lenders cut overnight deposits at the Frankfurt-based European Central Bank on May 25, placing 760 billion euros ($958 billion) from 761 billion euros the day before.

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