This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

European Banks Really Don't Trust Each Other

Stocks in this article: BACCJPMWFC

NEW YORK ( TheStreet) --In a sign that European banks are growing increasingly nervous about lending to each other, the three-month dollar Libor rate rose to 0.5181% Thursday according to the British Bankers Association.

The London Interbank Offered Rate represents the cost of borrowing US dollars in the London interbank market. The rate is set by 19 banks based on what they say is their cost of borrowing. The three-month euro Libor rate was at 1.4163%.

European banks' unwillingness to lend to each other is also evident in the widening Libor OIS (Overnight Index Swap) spread. This represents the difference between the rate at which banks are willing to lend to each other over and the market's expectation of the overnight fund's rate. The spread reflects what banks believe is the risk of default in lending to other banks.

The spread is at a two-year high of about 41 basis points, though still well below the financial crisis high of around 350 basis points hit in October 2008, following the collapse of Lehman Brothers.

Meanwhile the bond market is increasingly bearish on the ability of the Euro zone leaders to contain the crisis. German bonds, the supposed safe haven in the region, performed poorly at an auction on Wednesday. The yield on two-year Italian debt on Thursday touched 7.639%, while the 10-year yield was at 7.25%.

But equity markets are still optimistic that a solution can be reached. On Friday, European stocks rebounded strongly, prompting a recovery in U.S. stocks as well.

Bank stocks in the U.S. were making smart gains, with Bank of America (BAC) gaining 2.8%, JPMorgan Chase (JPM) adding 2.2%, Citigroup rising 3% and Wells Fargo (WFC) climbing 1.7% respectively during morning trades.

--Written by Shanthi Bharatwaj in New York



>To contact the writer of this article, click here: Shanthi Bharatwaj.

>To follow the writer on Twitter, go to http://twitter.com/shavenk.

>To submit a news tip, send an email to: tips@thestreet.com.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,810.06 +91.06 0.51%
S&P 500 2,063.50 +10.75 0.52%
NASDAQ 4,712.97 +11.1030 0.24%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs