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Bank Lending Stress Rises for Fourth Week in Euro Money Markets

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Nov. 23 (Bloomberg) -- European banks’ reluctance to make unsecured loans to one another rose for a fourth week to the highest in more than a month, 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 12.7 basis points at 8:30 a.m. in London from 12.4 on Nov. 16, data compiled by Bloomberg show. The measure is the highest since Oct. 8.

The cost for European banks to borrow in dollars was little changed with the three-month cross-currency basis swap at 27 basis points below Euribor. The one-year basis swap was 28 basis points below Euribor. A basis point is 0.01 percentage point.

The European Banking Federation’s euro overnight index average, or Eonia, of unsecured lending deals was set at a record low 0.071 percent yesterday from 0.072 percent the day before. The Eonia swap, an estimate of average overnight borrowing costs over the next three months, was unchanged at 6.3 basis points.

Lenders increased overnight deposits at the European Central Bank yesterday to 229 billion euros ($295 billion) from 226 billion euros the day before.

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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