Key euro-priced bank-to-bank lending rates rose on Friday, boosted by lower excess liquidity and the European Central Bank's looming interest rate increase. Recent policymaker comments have cemented expectations that the ECB remains ready to raise interest rates in April despite the earthquake, tsunami and nuclear disasters in Japan.
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 1.203 percent from 1.197 percent. Six-month rates edged up to 1.513 percent from 1.506 percent and longer-term 12-month rates climbed to 1.962 percent from 1.953 percent.
Shorter-term one-week rates edged up to 0.806 percent from 0.804 percent. EONIA overnight interest rates fixed at 0.672 percent on Thursday. Lower market excess liquidity also contributed to higher market interest rates. Excess liquidity fell to around 18 billion euros according to Reuters calculations, after banks stocked up less cash in the ECB's main refinancing operation this week.
The central bank left euro zone interest rates on hold at a record low 1 percent earlier this month but flagged plans to raise them next month, wrong footing markets which until then had expected the first rise much later in the year. The ECB also left all its liquidity operations at full allotment for at least another three months, putting its exit strategy from stimulus measures on hold for the second quarter running.
It 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 ECB injected during the turmoil.
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