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Euribor steady ahead of 3-year loan early repayment

ecb--FRANKFURT: Euribor bank-to-bank lending rates were unchanged on Wednesday, holding steady before a European Central Bank operation on Friday that will allow banks to repay 3-year loans early.


Banks took more than 1 trillion euros of ultra-cheap, three-year loans, or Long-Term Refinancing Operations, from the ECB in two separate offers roughly a year ago. The ECB used these LTROs to try to restore order to Europe's crisis-hit financial system.


Banks can soon begin to repay the money early on a voluntary basis. However, a key ECB policymaker has played down the impact this would have on short-term rates.


 Benoit Coeure, in charge of market operations on the ECB board, on Friday played down the chance of banks repaying a massive chunk of their LTRO cash this month and said excess liquidity in the euro zone remained very high.


 Reuters calculations show there is currently around 600 billion euros of excess liquidity sitting in euro zone banks.


While the heavy oversupply of ECB cash has long depressed the rates banks charge each other on lending markets, the prospect of a significant repayment, which analysts said could be up to 300 billion euros, has driven rates higher recently.


On Wednesday, three-month Euribor rates, traditionally the main gauge of unsecured bank-to-bank lending, remained unchanged at 0.209 percent.


The six-month rate was steady at 0.353 percent, while the one-week rate ticked up to 0.081 percent from 0.080 percent. The overnight Eonia rate on Tuesday inched up to 0.069 percent from 0.068 percent.


Dollar-priced bank-to-bank Euribor lending rates  were lower, with three-month rates falling to 0.50091 percent from 0.50364 percent and one-week rates dropping to 0.34091 percent from 0.34364 percent.


Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 0900 GMT.

Copyright Reuters, 2013