But borrowing costs in the US repurchase agreement market eased after trading at elevated levels in the previous two sessions as clients of MF global moved positions to new firms. The cost for Europeans to raise dollar funds traded at stressed levels as investors worried about contagion from the region's debt crisis, where leaders are seen as far from reaching a long-term solution. BNP Paribas on Thursday reported a 72 percent slide in quarterly earnings as it took losses on sovereign bond exposures in the region, including a heftier-than-expected 2.26 billion-euro ($3.12 billion) charge on BNP's Greek debt. "The best-case scenario for European banks is you get a 50 percent 'haircut' on Greek bonds. No one knows the interconnectedness in the European banking system and the potential ramifications of the haircut," said Amrut Nashikkar, analyst at Barclays Capital in New York. The cost to swap three-month euros into dollars rose to a spread of around minus 109 basis points, up from minus 102 basis points on Wednesday, and near the highest level since the financial crisis of 2008. "The concerns about European banks haven't gone away and this is one of the channels for them to raise dollar funding," said Nashikkar. European banks have been scrambling to raise affordable dollar funding as US-based money market funds reduce dollar loans to the region. In response, banks, including BNP, have been selling dollar-based assets and cutting jobs to reduce their need for dollars. BNP said its dollar funding needs fell by $20 billion in the third quarter and are due to go down by the same amount in the fourth. REPO COSTS NORMALIZE The cost of borrowing overnight in the US repo market retraced on Thursday after trading at elevated levels earlier in the week on what traders said was likely attributed to a need to fund positions after MF Global's sudden bankruptcy on Monday. "There was some speculation that there might have been a little bit of dislocation caused by the MF Global situation, but that was very orderly," said Kenneth Silliman, head of short-term rates trading at TD Securities in New York. Now, "it's back to the normal range," he said, noting that rates also typically rise in the week following the month-end as investors settle trades. The cost of borrowing overnight against Treasuries collateral fell to around 7 basis points, down from as high as 17 basis points on Wednesday and over 30 basis points on Tuesday.