FRANKFURT: Key euro-priced bank-to-bank lending rates hit a new 21-month high on Tuesday, as markets continued to readjust to last week's unexpected hint from the ECB that it could well raise interest rates next month.
The three-month Euribor rate -- traditionally the main gauge of unsecured interbank euro lending and a mix of interest rate expectations and banks' appetite for lending -- rose to 1.180 percent from 1.172 percent, the highest since June 2009.
Six-month rates fixed at 1.493 percent from 1.487 percent, shorter-term one-week rates closed in on the current level of official rates, hitting 0.895 percent from 0.872 percent, while longer-term 12-month rates rose to 1.946 percent.
Overnight rates rose on Monday to 0.447 percent, remaining well below the ECB's main rate of 1.0 percent.
The ECB left euro zone interest rates on hold at a record low of 1 percent at its monthly policy meeting last Thursday but said they could go up as soon as next month, wrongfooting markets that had been banking on a first hike late this year.
The bank also left all its liquidity operations at full allotment for at least another three months, putting its 'exit strategy' from extraordinary stimulus measures on hold for the second quarter running.
A recent reduction in excess market liquidity is also putting upward pressure to interbank rates. It stands at 14 billion euros according to Reuters calculations.
The ECB is already back to its pre-crisis range of funding. Three-month loans are once again the longest maturity on offer and banks have now paid back all the six-month and 12-month loans the central bank injected during the turmoil.
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