The cost for European banks to borrow in dollars declined to the lowest in a year, 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 36 basis points below the euro interbank offered rate at 8:30 a.m. in London, from minus 38.5 yesterday, data compiled by Bloomberg show. The cost is the cheapest since July 26, 2011.
The one-year basis swap was little changed at 42 basis points, or 0.42 percentage point, below Euribor.
The European Banking Federation’s euro overnight indexed average, or Eonia, was set at 10.9 basis points yesterday from 11.1 the day before. An estimate of overnight borrowing costs over the next three months, the Eonia overnight indexed swap, was 7.7 basis points from 7.6 yesterday.
Banks increased overnight deposits at the European Central Bank yesterday, placing 312 billion euros ($387 billion) with the Frankfurt-based ECB from 300 billion euros the day before.