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Bank Lending Stress Holds at One-Week High in Euro Money Markets

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Nov. 19 (Bloomberg) -- European banks’ reluctance to lend to one another held at the highest in a week, 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 little changed at 12.4 basis points, or 0.124 percentage point, at 8:30 a.m. in London, the highest since Nov. 8, data compiled by Bloomberg show. The measure has risen from 10.4 basis points on Oct. 26, the lowest since August 2007.

The cost for European banks to borrow in dollars fell from the highest in two months. The three-month cross-currency basis swap was 29 basis points below Euribor from minus 30 on Nov. 16. The one-year basis swap was 31 basis points below Euribor from minus 31.6.

The European Banking Federation’s euro overnight index average, or Eonia, of unsecured lending deals was set at 0.079 percent on Nov. 16 from 0.078 percent the day before. The Eonia swap, an estimate of average overnight borrowing costs over the next three months, was little changed at 6.8 basis points.

Lenders increased overnight deposits at the European Central Bank on Nov. 16 to 216 billion euros ($276 billion) from 214 billion euros the day before, the least since December 2011.

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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