The cost for European banks to borrow in dollars declined to the lowest in seven weeks, according to a money market indicator.
The three-month cross-currency basis swap, the rate banks pay to convert euro interest payments into dollars, was 47 basis points below the euro interbank offered rate at 9 a.m. in London from minus 48 yesterday. The cost is the lowest since May 29, according to data compiled by Bloomberg.
The one-year basis swap was little changed at 53 basis points, or 0.53 percentage point, below Euribor. Three-month Euribor, the rate banks say they see each other lending in euros, was set at a record low 0.477 percent yesterday.
An estimate of average overnight borrowing costs in euros, the Eonia OIS swap, was 9.9 basis points from 10.5 yesterday. The measure dropped nine basis points on July 5 after the European Central Bank lowered its deposit rate to zero. The swap dropped to a record 9.2 basis points yesterday.
The euro overnight indexed average, or Eonia, dropped to a record 11.4 basis points yesterday from 11.7 on July 13.
Banks increased overnight deposits at the Frankfurt-based ECB yesterday, placing 404 billion euros ($496 billion) from 387 billion euros on July 13. Lenders cut the deposits to the lowest in seven months on July 11 after the deposit rate cut took effect.