Overnight Rate Swap Rises for First Time in Six Days in Europe

An estimate of future average overnight borrowing costs in euros rose from a record low in the first increase in six days, a money-market indicator shows.

The three-month Eonia OIS swap rose to 5.5 basis points at 8:35 a.m. in London from 5.2 yesterday, according to data compiled by Bloomberg. The European Banking Federation’s euro overnight indexed average, or Eonia, of unsecured lending deals was set at 11.2 basis points yesterday from 11.1 the day before.

The cost for European banks to borrow in dollars fell. The three-month cross-currency basis swap, the rate banks pay to convert euro interest payments into the U.S. currency, was 42.5 basis points below the euro interbank offered rate, or Euribor, from minus 44 yesterday.

The one-year basis swap was 44 basis points, or 0.44 percentage point, below Euribor from minus 43. Euribor is the rate banks say they see each other lending in euros, according to the same panel of banks that contribute to Eonia.

Banks cut overnight deposits at the Frankfurt-based European Central Bank to 328 billion euros ($402 billion) yesterday from 337 billion euros the day before.

Three-month Euribor fell to a record 0.381 percent yesterday from 0.389 the previous day.

The London interbank offered rate, or Libor, for three- month dollar loans declined to 0.442 percent yesterday from 0.443 percent, the lowest since Nov. 7. Libor is published by the British Bankers’ Association.

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