Bank Lending Stress Holds at Five-Year Low in Euro Money Markets

Money-market indicators showed the level of stress in short-term unsecured interbank lending in euros held near the lowest since 2007.

The difference between the euro interbank offered rate and overnight index swaps, known as the Euribor-OIS spread, was 12.9 basis points, or 0.129 percentage point, at 8:50 a.m. in London, according to data compiled by Bloomberg. The measure reached 12.8 on Oct. 1, the lowest since August 2007.

The cost for European banks to borrow in dollars rose for the second day. The three-month cross-currency basis swap was 24 basis points below Euribor from minus 23.7 yesterday. The one- year basis swap was little changed at minus 24.

The European Banking Federation’s euro overnight index average, or Eonia, of unsecured lending deals was set at 0.094 percent yesterday from 0.093 percent on Oct. 5. The Eonia swap, an estimate of average overnight borrowing costs over the next three months, was nine basis points from 8.5 yesterday.

Lenders cut overnight deposits at the European Central Bank yesterday, placing 290 billion euros ($375 billion) with the Frankfurt-based central bank from 296 billion euros yesterday.

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