Bank Lending Stress Falls to 18-Month Low in Euro Money Markets

European banks’ reluctance to lend to one another fell to the lowest in more than 18 months, according to a money-market indicator.

The difference between the euro interbank offered rate and overnight indexed swaps, known as the Euribor-OIS spread, was 14 basis points, or 0.14 percentage point, at 8:25 a.m. in London, from 15.3 basis points on Sept. 21, data compiled by Bloomberg show. The gap is the smallest since March 3, 2011.

The cost for European banks to borrow in dollars was little changed. The three-month cross-currency basis swap was 21 basis points below Euribor. The one-year basis swap was little changed at 24 basis points below Euribor.

The European Banking Federation’s euro overnight index average, or Eonia, of unsecured lending deals was set at 0.095 percent on Sept. 21 from 0.097 percent the day before. The Eonia swap, an estimate of average overnight borrowing costs over the next three months, was 7.8 basis points from 7.5 on Sept. 21.

Lenders increased overnight deposits at the European Central Bank on Sept. 21, placing 306 billion euros ($397 billion) with the Frankfurt-based central bank from 302 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

Press spacebar to pause and continue. Press esc to stop.

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.