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Banks’ Reluctance to Lend to Each Other Holds at 13 Month-Low

Aug. 30 (Bloomberg) -- European banks’ reluctance to lend to one another held near the lowest in more than 13 months, according to a money market indicator.

The Euribor-OIS spread, the difference between the euro interbank offered rate and overnight indexed swaps, was 22.4 basis points, or 0.224 percentage point, at 9:42 a.m. in London, according to data compiled by Bloomberg. The measure was 21.7 basis points yesterday, the lowest since July 5, 2011.

The cost for European banks to borrow in dollars held at the lowest since July 22, 2011. The three-month cross-currency basis swap, the rate banks pay to convert euro interest payments into dollars, was unchanged at 30.5 basis points below Euribor. The one-year basis swap was 35.5 basis points below Euribor from minus 36 yesterday.

The European Banking Federation’s euro overnight index average, or Eonia, of unsecured lending deals was set at 0.102 percent yesterday from 0.111 percent the day before. The Eonia swap, an estimate of average overnight borrowing costs over the next three months, was at 6.6 basis points from 6.9 yesterday.

Lenders increased overnight deposits at the European Central Bank yesterday, placing 334 billion euros ($419 billion) with the Frankfurt-based central bank from 332 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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