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.

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

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.