Three-month Euribor rates rise to 1.5 percent

Key euro-priced bank-to-bank lending rates rose above 1.5 percent for the first time in more than two years on Friday, supported by expectations that the ECB will hike official interest rates next month. The ECB last week signalled it would raise rates next month, a move economists expect it to follow up with at least one more increase later in the year.
The rise in market interest rates was tempered by the rise in excess liquidity to 36 billion euros. 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 1.502 percent from 1.494 percent, the first time since March 2009 it is above 1.5 percent.
Shorter-term one-week Euribor rates rose to 1.289 percent from 1.274 percent and six-month rates increased to 1.759 percent from 1.752 percent, while longer-term 12-month rates ticked up to 2.142 percent from 2.140 percent. EONIA overnight interest rates rose to 1.303 percent on Thursday from 1.269 percent the previous day.
Whilst flagging a rate hike last week, the ECB also acknowledged the euro zone's relentless debt problems by extending limit-free liquidity provision to banks for another three months. The ECB is back to its pre-crisis range of funding operations but the debt troubles are preventing it from further normalisation.
Three-month loans are again the longest maturity on offer and banks have now paid back all the six-month and 12-month loans the ECB injected at the height of the turmoil. Banks increased their intake of ECB funding this week, taking 135.6 billion euros in seven-day funding compared with 102.4 billion euros the previous week, which could temper market rates in the coming week.