Bank Dollar Funding Costs Hold at Week-Low in Euro Money Markets

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

The three-month cross-currency basis swap, the rate banks pay to borrow in dollars, was 28 basis points below the euro interbank offered rate at 8:35 a.m. in London, data compiled by Bloomberg show. The measure reached minus 30 on Nov. 16, the most expensive in two months.

The one-year basis swap was little changed at 29 basis points, or 0.28 percentage point, below Euribor.

A measure of European banks’ reluctance to make unsecured loans to one another rose to a 1 1/2-month high. The difference between Euribor and overnight index swaps, known as the Euribor-OIS spread, was little changed at 12.9 basis points, the highest since Oct. 8.

The European Banking Federation’s euro overnight index average, or Eonia, of unsecured lending deals was set at 0.072 percent yesterday, from 0.074 percent the day before. The Eonia swap, an estimate of average overnight borrowing costs over the next three months, was unchanged at 6.1 basis points, the lowest since Aug. 1.

Lenders cut overnight deposits at the European Central Bank yesterday to 226 billion euros ($290 billion) from 230 billion euros the day before.

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