Bank Lending Stress Holds at Five-Year Low in Euro Money Markets

Money-market indicators showed the level of stress in short-term euro funding held near the lowest since 2007.

The difference between the euro interbank offered rate and overnight index swaps, known as the Euribor-OIS spread, was little changed at 13.2 basis points, or 0.132 percentage point, at 8:20 a.m. in London, according to data compiled by Bloomberg. The measure reached a five-year low of 12.8 basis points on Oct. 1.

The cost for European banks to borrow in dollars held near the lowest in more than a week. The three-month cross-currency basis swap was 23 basis points below Euribor, the cheapest since Sept. 25. The one-year basis swap was 24.5 basis points below Euribor from minus 25 yesterday.

The European Banking Federation’s euro overnight index average, or Eonia, of unsecured lending deals was set at 0.095 percent yesterday from 0.085 percent the day before. The volume of overnight lending as measured by the EBF in Brussels rose to 24.6 billion euros ($32 billion) of transactions yesterday, from 10 billion euros the day before.

The Eonia swap, an estimate of average overnight borrowing costs over the next three months, was 8.5 basis points from 8.7 yesterday. Lenders cut overnight deposits at the European Central Bank yesterday to the lowest since December 2011, placing 278 billion euros ($361 billion) with the Frankfurt-based central bank from 279 billion euros the day before.

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