Key euro-priced bank-to-bank lending rates resumed their recent climb on Friday, as deep-seated concerns about the economic outlook outweighed downward pressure from an excess of liquidity. A worsening euro zone debt crisis and fears a recession is looming have seen money markets clam up and prompted banks to stock up on limit-free ECB funding, pushing liquidity back to exceptionally high levels.
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 1.540 percent on Friday, having paused at 1.539 percent on Thursday. Other key rates moved in the opposite direction. Six-month Euribor rates dropped to 1.744 percent from 1.745 percent from 1.743 percent, while 12-month rates fell to 2.083 percent from 2.085. One-week Euribor rates, most heavily influenced by excess liquidity - at 109 billion euros on Friday according to Reuters calculations - dipped to 1.108 percent from 1.110 percent.
Overnight rates fixed at 0.890 on Thursday from 0.896 percent, well below the ECB's 1.5 percent headline interest rate. Banks took 134 billion euros in the ECB's latest offering of 7-day funding on Tuesday, slightly below expectations of 140 billion, but huge against the ECB's calculation that markets were already oversupplied to the tune of 107 billion euros. There were no takers for the ECB's offering of dollar funding on Wednesday, helping ease fears about euro zone banks' access to dollar markets, after the facility was used last week for the first time since February.
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