€STR: The New Euro Short-Term Interest Rate

The €STR, or Euro Short-Term Interest Rate, is a new benchmark rate that's been making waves in the financial world. It's set by the European Central Bank (ECB) and is used to guide monetary policy.

The €STR is calculated as the weighted average of unsecured overnight lending rates between banks in the euro area. This is a significant change from the previous benchmark rate, which was the Eonia rate.

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The €STR is a euro short-term rate that measures the wholesale unsecured overnight borrowing costs of a sample of euro-area banks. It's a crucial benchmark for the financial industry.

The €STR is calculated using overnight unsecured fixed rate deposit transactions above €1 million. This means that only transactions of €1 million or more are considered in the calculation.

The calculation process involves ordering the transactions from lowest to highest rate, aggregating them at each rate level, removing the top and bottom 25% in volume terms, and then calculating the mean of the remaining 50%. This process is done on every TARGET business day.

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The €STR is published on every TARGET business day at 8:00 CET, reflecting the trading activity of the previous business day. If errors are detected, the €STR is revised and republished on the same day at 9:00 CET.

The €STR serves as a risk-free rate for the euro area, recommended by the Working Group on Risk-Free Rates (WGRFR). This means that market participants are encouraged to use the €STR as a standard reference rate, replacing existing benchmark rates like EONIA.

The €STR has an International Securities Identification Number (ISIN) of EU000A2X2A25 and a Financial Instrument Short Name (FISN) of ECB/EUR EURO SHORT-TERM RATE IR.

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The €STR is calculated as an average of the rates of unsecured overnight deposit transactions carried out by banks with banking and non-banking financial counterparties, as reported in the framework of the MMSR. This methodology was defined on the basis of feedback from two public consultations and is in line with the principles set out by the International Organization of Securities Commissions (IOSCO).

The €STR is calculated using overnight unsecured fixed rate deposit transactions above €1 million. For each TARGET business day, the €STR is calculated as a volume-weighted trimmed mean.

Here are the steps in the calculation:

The €STR is published on every TARGET business day at 8:00 CET, reflecting the trading activity of the previous business day. If errors are detected, the €STR is revised and republished on the same day at 9:00 CET.

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The transition to €STR is a significant change for the euro money market. EONIA will be published until 3 January 2022.

The transition path for existing contracts was recommended by the WGRFR and implemented by the EMMI. This involved publishing the details of EONIA's new calculation methodology after a public consultation.

EONIA is now calculated as the €STR plus a spread of 8.5 basis points, provided by the ECB on 31 May 2019. This change was made to prepare for the interest rate benchmark reforms and the new risk-free rates.

You can manage the transition to the €STR by referring to the WGRFR recommendations from a practical, legal, accounting and risk management perspective. These recommendations are available on the ECB's website.

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The transition from EONIA to €STR is a significant change that's been implemented to improve the stability and reliability of interest rate benchmarks.

EONIA is being replaced by €STR, which is a more robust and reliable rate.

The transition was recommended by the WGRFR, a group that advises on interest rate benchmarks, and was implemented by the EMMI, a group that calculates EONIA.

The new calculation methodology for EONIA was published by the EMMI after a public consultation.

EONIA will be calculated as the €STR plus a spread of 8.5 basis points, provided by the ECB on 31 May 2019.

EONIA will be published until 3 January 2022, after which the transition to €STR will be complete.

To prepare for this transition, it's essential to review the WGRFR recommendations for a practical, legal, accounting, and risk management perspective.

Here are some key points to consider during the transition:

The stats are telling us something. The latest value is 2.66% as of February 26, 2025.

This is a significant drop from the previous day, where the value was 2.67%. The change from yesterday is a small -0.04%.

Looking at the long-term average, we're seeing a much lower value of 1.11%. This gives us an idea of the overall trend.

The average growth rate is a staggering -206.9%. This is a huge drop, and it's essential to keep an eye on it.

Here's a quick rundown of the key stats:

The data is updated daily, and the next release is scheduled for March 3, 2025.