Bank Lending Stress Rises to 10-Week High in Euro Money Market

European banks’ reluctance to make unsecured loans to one another rose to the highest in 10 weeks, according to a money-market indicator.

The difference between the euro interbank offered rate and overnight index swaps, known as the Euribor-OIS spread, was 14.4 basis points at 8:25 a.m. in London from 14.2 on Dec. 7, data compiled by Bloomberg show. The spread is the widest since Sept. 21.

The cost for European banks to borrow in dollars held near the highest in more than a week. The three-month cross-currency basis swap was 25.5 basis points below Euribor from minus 26 on Dec. 7. The one-year basis swap was little changed at 26.5 basis points below Euribor. A basis point is 0.01 percentage point.

The European Banking Federation’s euro overnight index average, or Eonia, of unsecured lending deals was set at 0.072 percent on Dec. 7, unchanged from the day before. The Eonia swap, an estimate of overnight borrowing costs over the next three months, was little changed at 4.2 basis points, the lowest since July 30.

The volume of overnight lending as measured by the EBF in Brussels fell to 14.6 billion euros ($18.8 billion) of transactions on Dec. 7, the lowest since Nov. 1, from 15 billion euros the day before. Lenders increased overnight deposits at the European Central Bank on Dec. 7 to 235 billion euros from 230 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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