Euribor-OIS Spread Measure Rises for First Time in Four Days

Sept. 29 (Bloomberg) -- A measure of banks' reluctance to lend to one another in Europe rose for the first time in four days, according to a money markets indicator.

The Euribor-OIS spread, the difference between three-month Euribor and overnight index swaps, widened to 81 basis points as of 4:45 p.m. in London, from 78 yesterday, Bloomberg data show. The gap reached a 2 1/2-year high of 89 on Sept. 23.

German lawmakers today approved an expansion of the euro- area rescue fund, freeing the way for European officials to weigh further measures to bolster Greece and keep the sovereign crisis from spreading. More than a third of participants in a global survey of Bloomberg subscribers say deteriorating European debt will derail the world economy over the next year.

“Perceptions of an orderly solution to the European crisis are wobbling,” Bill Blain, a strategist at broker Newedge Group in London, wrote in a note. “There are just too many known and unknown unknowns to face the day with much confidence.”

The rate banks pay to convert euro payments into dollars, measured by the three-month cross-currency basis swap was 104 basis points below the euro interbank offered rate, compared with 100 basis points yesterday. The cost was 112.5 basis points under Euribor on Sept. 12, when the swap was the most expensive since December 2008. A basis point is 0.01 percentage point.

The one-year cross-currency basis swap was 68.5 basis points less than Euribor from 67 yesterday, Bloomberg data show.

ECB Deposits

The ECB said financial institutions increased overnight deposits. Banks left 173 billion euros ($236 billion) with the Frankfurt-based lender yesterday, compared with 164 billion euros Sept. 26 and 197.8 billion euros Sept. 12, the ECB said.

Three-month Euribor -- the rate banks say they pay for three-month loans in euros -- increased to 1.550 percent from 1.544 percent yesterday. One-week Euribor fell to 1.220 percent from 1.228 percent.

The three-month dollar London interbank offered rate, or Libor, rose for a 15th day to 0.372 percent from 0.369 percent, according to the British Bankers' Association. That's the highest since Aug. 12, 2010.

The TED spread, or the difference between what lenders and the U.S. government pay to borrow for three months, was little changed at 36.5 basis points.

--With assistance from Abigail Moses in London. Editors: Andrew Reierson, Michael Shanahan

To contact the reporters on this story: Keith Jenkins in London at kjenkins3bloomberg.net; David Goodman in London at dgoodman28bloomberg.net

To contact the editors responsible for this story: Paul Armstrong at Parmstrong10bloomberg.net; Daniel Tilles at dtillesbloomberg.net