Banks’ Dollar Funding Costs Hold Near Two-Month High in Europe

The cost for European banks to convert euro interest payments into dollars near the highest in more than two months, according to a money-markets indicator.

The three-month cross-currency basis swap, the rate banks pay to borrow in dollars, was 29 basis points below the euro interbank offered rate at 8:15 a.m. in London, data compiled by Bloomberg show. The measure reached minus 30 on Nov. 16, the most expensive since Sept. 5.

The one-year basis swap was little changed at 30 basis points, or 0.3 percentage point, below Euribor.

A measure of European banks’ reluctance to make unsecured loans to one another held at the highest in more than a week. The difference between Euribor and overnight index swaps, known as the Euribor-OIS spread, was little changed at 12.4 basis points, the highest since Nov. 7.

The European Banking Federation’s euro overnight index average, or Eonia, of unsecured lending deals was 0.077 percent yesterday from 0.079 percent on Nov. 16. The Eonia swap, an estimate of average overnight borrowing costs over the next three months, was little changed at 6.7 basis points.

The volume of overnight lending as measured by the EBF in Brussels rose to 22.2 billion euros of transactions yesterday, the highest since Oct. 30, from 20.8 billion euros on Nov. 16. Lenders increased overnight deposits at the European Central Bank yesterday to 240 billion euros ($307 billion) from 216 billion euros on Nov. 16.

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