The EONIA defines the average interest rate of the euro with respect to overnight interbank credit operations. EONIA is an acronym for Euro Overnight Index Average, which in Spanish means Average One-Day Euro Rate Index.
Otherwise, the EONIA is like a benchmark day-only Euribor based on money transactions between a select group of European banks.
It is calculated and published daily by the European Central Bank with the information received from the panel of credit operations between banks in the euro area.
Banks carry out a multitude of financial operations with one day of validity, lending money to each other, long enough to be able to obtain a profit through financial leverage. It is for this last reason, why this index is used as a reference in the transactions of derivative products (futures, swaps, options, forex ...), because they are products that on many occasions have a one-day expiration, being thus tighter than the Euribor.
Difference between Eonia and Euribor
The fundamental differences between the Eonia and the Euribor are:
- The Eonia takes as a reference the price and volume of transactions already carried out between banks. While the Euribor is made from the prices offered and the demand between capitals of various entities.
- The duration of the Eonia is one day, so it is taken as a reference in very short operations. While the Euribor is taken as a reference for long-term operations (months, quarters, years ...).
The Eonia, is a data that the Bank of Spain provides with total transparency with daily update. To consult the eonia click here.