Euro overnight lending rates are poised to fall below the ECB's key refi rate in coming days after excess liquidity hit a five-month high on Thursday, but funds for over two weeks were still bid up on Greece's debt crisis. Factors related to the end of the first half of the year, when banks tend to lend less as they square up their books, also kept cash prices over two weeks near the European Central Bank's main refi rate of 1.25 percent, money market traders said.
The Eonia overnight rate fixed at 1.091 percent from 1.307 percent on Tuesday after banks took 187 billion euros in weekly funds from the ECB this week, 50 billion euros more than the previous week. Traders said overnight funds were curently trading around 0.85 percent. The hefty bank take-up boosted excess liquidity in the system to 70 billion euros, according to Reuters calculations, the highest since early February.
While one-week Euribor rates were fixed lower at 1.22 percent on Thursday, from 1.258 percent the previous day, three-week rates remained above the refi rate at 1.28 percent with the key three-month rate unchanged at 1.526 percent. Equivalent three-month Libor rates were set higher at 1.46938 percent from 1.46813 percent but their spread over anticipated central bank rates - a measure of money market tensions - was slightly wider around 19 basis points. Other measures of money market stress such as the one-year cross currency basis swaps, reflecting the cost of accessing dollar funds, continued to ease off levels seen late last week when worries about resolving the Greek debt crisis peaked.
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