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Bank Lending Stress Falls to 18-Month Low in Euro Money Markets

Sept. 24 (Bloomberg) -- European banks’ reluctance to lend to one another fell to the lowest in more than 18 months, according to a money-market indicator.

The difference between the euro interbank offered rate and overnight indexed swaps, known as the Euribor-OIS spread, was 14.4 basis points, or 0.144 percentage point, at 10:25 a.m. in London, from 15.3 basis points on Sept. 21, data compiled by Bloomberg show. The gap is the smallest since March 3, 2011.

Three-month Euribor, the rate banks say they see each other lending in euros, was set at a record-low 0.225 percent, down from 0.228 percent on Sept. 21. The benchmark is derived from a daily survey of banks for the European Banking Federation.

One-week Euribor was set at 0.085 percent compared with 0.084 percent on Sept. 21.

The cost for European banks to borrow in dollars rose. The three-month cross-currency basis swap was 22 basis points below Euribor from minus 21 on Sept. 21. The one-year basis swap was little changed at 24 basis points below Euribor.

The European Banking Federation’s euro overnight index average, or Eonia, of unsecured lending deals was set at 0.095 percent on Sept. 21 from 0.097 percent the day before. The Eonia swap, an estimate of average overnight borrowing costs over the next three months, was 7.9 basis points from 7.5 on Sept. 21.

Lenders increased overnight deposits at the European Central Bank on Sept. 21, placing 306 billion euros ($397 billion) with the Frankfurt-based central bank from 302 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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