Bank Dollar Funding Costs Hold at Year Low in Euro Money Markets

The cost for European banks to borrow in dollars held at the lowest level in more than a year, according to a money-markets indicator.

The three-month cross-currency basis swap, the rate banks pay to convert euro interest payments into dollars, was 35 basis points below the euro interbank offered rate, or Euribor, at 12:30 p.m. in London. It reached minus 34.5 basis points on Aug. 10, the cheapest since July 26, 2011.

The one-year basis swap was little changed at 40.5 basis points below Euribor. A basis point is 0.01 percentage point.

Three-month Euribor, the rate banks say they see each other lending in euros, was set at a record low 0.349 percent from 0.353 percent on Aug. 10. The benchmark, derived from a daily survey of banks for the European Banking Federation, fell for the sixth day.

The London interbank offered rate, or Libor, for three- month dollar loans fell to 0.435 percent, the lowest since Nov. 2, from 0.437 percent on Aug. 10. Libor is published by the British Bankers’ Association.

The three-month Eonia overnight indexed swap was unchanged at seven basis points, according to data compiled by Bloomberg. The EBF’s euro overnight indexed average, or Eonia, of unsecured lending deals was set at 11.5 basis points on Friday, from 12.3 the day before.

Banks increased overnight deposits at the Frankfurt-based European Central Bank to 311 billion euros ($382 billion) on Aug. 10, from 289 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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