The euro short-term rate, known as €STR, is the European Central Bank’s daily benchmark for the cost of unsecured overnight borrowing among euro area banks. It has been published every TARGET2 business day since October 2, 2019, and it is calculated entirely from real transactions that reporting banks are legally required to submit.1European Central Bank. ECB Announces Start Date for Euro Short-Term Rate The rate now underpins trillions of euros in derivatives, floating-rate notes, and loan agreements across the continent, and it replaced EONIA, an older panel-based benchmark that could not satisfy modern rules requiring benchmarks to rest on real data.
What the Rate Measures
€STR captures the wholesale unsecured overnight borrowing costs of banks located in the euro area.2European Central Bank. Overview of the Euro Short-Term Rate Two features do most of the work in that definition. The transactions are unsecured, meaning no collateral is posted, so the rate reflects what banks charge each other for pure overnight credit. And the maturity is overnight, so every trade in the sample settles the next business day.
The rate draws on borrowing from a defined set of financial counterparties: insurance companies, pension funds, money market funds, and other banks.3European Central Bank. The Euro Short-Term Rate Methodology and Policies Borrowing from non-financial corporations does not count. Only arm’s length transactions are included, which removes intragroup trades and other deals that would not reflect competitive market pricing. The minimum trade size is €1 million.
How the Rate Is Calculated
Every input comes from the Money Market Statistical Reporting (MMSR) framework, which obliges designated euro area banks to submit transaction-level records of their daily borrowing.4European Central Bank. Money Market Statistical Reporting On a typical day, around 50 banks actively contribute transactions, producing roughly 900 individual trades with a combined volume above €60 billion.5European Central Bank. Euro Short-Term Rate Data
The ECB applies a volume-weighted trimmed mean to that data in four steps:3European Central Bank. The Euro Short-Term Rate Methodology and Policies
- Eligible transactions are sorted from the lowest interest rate to the highest.
- Trades executed at the same rate are aggregated.
- The top 25% and bottom 25% of the distribution, measured by volume, are removed.
- A volume-weighted mean is calculated from the remaining middle 50%, and the result is rounded to three decimal places.
The trimming step is what makes the rate hard to distort. A single large trade at an unusual rate sits at the edge of the distribution and is stripped out before averaging. Larger trades within the surviving middle band carry more weight, so the published rate tracks where the bulk of overnight money actually changes hands. No expert judgment enters the calculation; the ECB’s own governing guideline forbids it outside narrowly defined contingency situations.
Publication Schedule and What Happens When Data Is Thin
The ECB publishes €STR at 08:00 Central European Time on each TARGET2 business day, based on transactions conducted and settled the previous business day.2European Central Bank. Overview of the Euro Short-Term Rate On holidays, publication shifts to the next business day. The rate reaches markets through the ECB’s data portal and through the major financial data providers.
If the ECB discovers an error that would move the rate by more than two basis points, it publishes a corrected figure by 09:00 CET the same day. No revisions are made after that window closes. The tight cutoff is deliberate: thousands of contracts settle against the published number, and finality matters as much as accuracy.
The methodology also anticipates days when the market itself is too thin to produce a reliable rate. A contingency procedure activates when fewer than 20 banks report eligible transactions, or when five banks account for 75% or more of total volume.3European Central Bank. The Euro Short-Term Rate Methodology and Policies When triggered, the ECB blends the rate implied by available transactions with the prior day’s published rate, using a volume-weighted average. If no transactions are reported at all, the previous day’s rate carries forward.
A contingency day that coincides with an ECB policy rate decision is handled separately. If the previous day’s €STR sat outside the ECB’s interest rate corridor, the carry-forward is adjusted by the change in the relevant corridor boundary. If it sat inside a corridor that shifted uniformly, the carry-forward moves by the same amount. If the corridor width itself changes, the prior rate is repositioned so it holds the same relative place within the new corridor. These rules stop a stale number from being reused on a day when the ECB has just changed its stance.
€STR Compared to EURIBOR and SOFR
These three rates come up constantly in the same conversations, and treating them as interchangeable causes real problems in contracts.
€STR is overnight, unsecured, and built purely from transactions. It is classified as a near risk-free rate because the overnight horizon leaves almost no room for a borrower to default, and because the calculation removes expert judgment.6European Central Bank. The Euro Short-Term Rate – Completing the Transition to the New Euro Benchmark
EURIBOR is different in kind. It is a term rate published at five maturities from one week to twelve months, and it uses a hybrid methodology in which panel banks contribute rates based first on actual transactions, then on transactions in nearby maturities, and finally on modeled estimates when real data is thin.7European Money Markets Institute. Euribor Methodology Because EURIBOR spans longer periods and can incorporate judgment-based inputs, it embeds credit and term risk that €STR deliberately excludes. EURIBOR remains in wide use for euro-denominated mortgages and corporate loans, and no discontinuation has been announced.
SOFR is the U.S. dollar analogue of a near risk-free overnight benchmark, with one structural difference: SOFR is a secured rate, based on overnight repurchase agreements collateralized by U.S. Treasury securities.8Federal Reserve Bank of New York. Secured Overnight Financing Rate Data The ECB considered a secured euro benchmark and decided against it, judging that the patchwork of government bond collateral used in euro repo markets would inject noise unrelated to the cost of liquidity.
How €STR Is Used in Financial Products
The most natural application is overnight indexed swaps, in which two parties exchange a fixed rate for a compounded overnight rate over an agreed period. Because €STR carries almost no credit risk and reflects genuine borrowing activity, it gives both sides a clean reference for pricing interest rate exposure.
Floating-rate notes and corporate credit facilities also reference €STR, but because those instruments run for weeks or months, they need a compounded version. Compounding accumulates the daily rate over the period as though each day’s rate were reinvested. To keep counterparties from calculating slightly different numbers, the ECB publishes pre-calculated compounded €STR averages over standardized tenors, along with a compounded €STR index.5European Central Bank. Euro Short-Term Rate Data
Some borrowers need to know their interest payment in advance rather than at the end of a compounding period. A forward-looking €STR term rate meets that need by deriving a rate for a future period from derivatives market pricing. The ECB’s working group on euro risk-free rates has recommended that market participants build such a term rate into EURIBOR-referencing products, including retail mortgages, consumer loans, and SME lending facilities, as a fallback rather than as a primary replacement for EURIBOR.9LSEG. FTSE Term Euro Short-Term Rate
Why €STR Replaced EONIA
EONIA served as the euro area’s overnight benchmark for two decades but could not meet the EU Benchmarks Regulation’s requirement that benchmarks rest on sufficient real transaction data.10EUR-Lex. Ensuring the Accuracy and Integrity of Financial Benchmarks Rather than rebuild EONIA, the European Money Markets Institute recalibrated it during a transition period so that it equaled €STR plus a fixed spread of 8.5 basis points. The ECB set that spread using a trimmed mean of the daily difference between EONIA and pre-€STR data over a one-year window ending April 16, 2019.11European Central Bank. ECB Provides a One-Off Spread Between Euro Short-Term Rate and EONIA
EONIA was permanently discontinued on January 3, 2022.12European Money Markets Institute. Public Statement – Planned Cessation of EONIA Contracts that still referenced EONIA after that date had to fall back to a replacement rate, and for derivatives collateral agreements the International Swaps and Derivatives Association published a protocol that automatically converted EONIA references to €STR plus the same 8.5 basis point spread.13International Swaps and Derivatives Association. ISDA 2021 EONIA Collateral Agreement Fallbacks Protocol That spread is why old EONIA numbers and current €STR numbers do not line up cleanly when comparing historical series.