Banks’ Dollar Funding Costs Rise From 15-Month Low in Europe
The cost for European banks to borrow in dollars rose from the lowest level in more than 15 months, 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 22 basis points below the euro interbank offered rate at 9:14 a.m. in London from minus 19 yesterday, according to data compiled by Bloomberg. The swap has risen from minus 17 on Sept. 14, the cheapest since June 14, 2011.
The one-year basis swap was 27 basis points, or 0.255 percentage point, below Euribor from minus 25 yesterday.
A measure of European banks’ reluctance to make unsecured loans to one another rose from the lowest since June 2011. The difference between Euribor and overnight index swaps, the Euribor-OIS spread, was 16.7 basis points from 16 yesterday.
The European Banking Federation’s euro overnight index average, or Eonia, of unsecured lending deals was set at 0.089 percent yesterday from 0.095 percent on Sept. 14. The Eonia swap, an estimate of average overnight borrowing costs over the next three months, was 8.1 basis points compared with 8.6 yesterday.
Lenders cut overnight deposits at the European Central Bank yesterday, placing 306 billion euros ($401 billion) with the Frankfurt-based central bank from 335 billion euros on Sept. 14.
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