€STER reference rate
€STER (Euro Short-Term Rate) is the euro area overnight reference rate published daily by the European Central Bank. It replaced EONIA at end-2021 and reflects the actual cost at which eurozone banks lend each other unsecured overnight funds.
Key points
- Computed from actual unsecured interbank transactions, making it more representative than the declaration-based EONIA.
- Published by the ECB every business day following the value date, around 09:00 CET.
- Used as the reference rate for euro floating-rate derivatives (€STER swaps).
- Also serves as the benchmark for some variable-rate mortgage products in Europe.
- The ECB also publishes 30-, 90-, and 180-day compounded averages for contracts requiring a historical benchmark.
Frequently asked questions
Why was EONIA replaced by €STER?
EONIA relied on daily declarations from a panel of banks — a mechanism deemed insufficiently robust after the LIBOR scandal. The EU Benchmark Regulation (BMR, 2016) required reference rates to reflect actual transactions. €STER, based on transaction data collected directly by the ECB, meets those requirements.
How does €STER affect the rate on a variable-rate mortgage?
A mortgage indexed to €STER has its rate periodically revised using a compounded average of €STER over the observation period (e.g., 30 days). In practice, French banks still mostly peg variable-rate mortgages to 3-month Euribor, but €STER has been gaining ground as an alternative benchmark since 2022.
What is the difference between €STER and Euribor?
€STER covers only overnight transactions and is administered directly by the ECB. Euribor covers multiple tenors (1 week, 1, 3, 6, and 12 months) and is administered by EMMI using a hybrid methodology combining transactions and expert judgment. Both coexist but serve different functions.
In practice
A European developer enters a 3-year interest-rate swap to hedge a commercial property loan. The floating leg is indexed to the 30-day compounded €STER. When €STER rises 20 basis points following an ECB decision, the hedging cost increases mechanically — something the broker factors into its advice to the developer.
Official sources
- Euro short-term rate (€STR) · Banque centrale européenne
- The annual percentage rate (APRC) · Service-Public.gouv.fr
- Mortgage credit (official guide) · Service-Public.gouv.fr