Euribor rates ease to fresh 5-month low

FRANKFURT: Key euro-priced bank-to-bank lending rates fell for the ninth session running on Thursday, hitting a new five-month low as last week's surprise ECB interest rate cut and excess liquidity weighed on money markets.

The ECB cut rates by 25 basis points to 1.25 percent last Thursday as it warned the euro zone could slide into a mild recession by the end of the year.

Interbank market rates continued to drop on Thursday after Friday's initial sharp fall in the wake of the cut.

Three-month Euribor rates, traditionally the main gauge of unsecured interbank euro lending and a mix of interest rate expectations and banks' appetite for lending, fell to 1.464 percent from 1.47 percent, dropping to their lowest since June.

Six-month Euribor eased to 1.689 percent from 1.691 percent while 12-month rates eased to 2.033 percent from 2.036 percent.

Shorter-term rates fell further below 1 percent. One-week rates fell to 0.932 percent from 0.942 percent. On Wednesday overnight rates fell to 0.769 percent from 1.219 percent, easing after a jump at the end of the ECB maintenance period, as is normal.

The ECB reinstated some of its most potent crisis-fighting tools last month, including one-year liquidity injections, although the moves have done little to suggest they will kick-start interbank lending.

ECB liquidity is expected to keep the euro money market heavily oversupplied for the foreseeable future and maintain downward pressure on interbank rates.

Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 1000 GMT.

Copyright Reuters, 2011