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Dollar Funding Costs Hold Near 5-Day High in Euro Money Markets

Sept. 20 (Bloomberg) -- The cost for European banks to borrow in dollars held near the highest level in five days, according to a money-markets indicator.

The three-month cross-currency basis swap, the rate banks pay to convert euro interest payments into dollars, was 22 basis points below the euro interbank offered rate at 10:05 a.m. in London, according to data compiled by Bloomberg. The cost has increased from minus 15.1 on Sept. 14, which was the cheapest level since June 2011.

The one-year basis swap was 26.5 basis points, or 0.265 percentage point, below Euribor from minus 26 yesterday.

Three-month Euribor, the rate banks say they see each other lending in euros, was set at a record-low 0.233 percent, down from 0.238 percent yesterday. The benchmark is derived from a daily survey of banks for the European Banking Federation.

A measure of European banks’ reluctance to make unsecured loans to one another held at the lowest since June 2011. The difference between Euribor and overnight index swaps, the Euribor-OIS spread, was little changed at 15.9 basis points.

The European Banking Federation’s euro overnight index average, or Eonia, of unsecured lending deals was set at 0.09 percent yesterday from 0.1 percent the day before. The Eonia swap, an estimate of average overnight borrowing costs over the next three months, was 7.7 basis points, the lowest since Sept. 5, compared with 8.3 yesterday.

Lenders cut overnight deposits at the European Central Bank yesterday, placing 299 billion euros ($387 billion) with the Frankfurt-based central bank from 318 billion euros the day before.

To contact the reporter on this story: Katie Linsell in London at

To contact the editor responsible for this story: Paul Armstrong at

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