FRANKFURT: Key euro zone three-month bank-to-bank lending rates edged towards all-time lows on Wednesday, pulled down by the huge amount of excess cash created by the European Central Bank's recent unprecedented injections of long-term liquidity.
The ECB, which kept euro zone interest rates at 1.0 percent again this month, has poured more than 1 trillion euros of ultra-cheap, three-year funds into the banking system since the end of last year, halving interbank rates in the process.
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 further on Wednesday, hitting a new two-year low of 0.685 percent from 0.687 percent.
Six-month rates eased to 0.974 percent from 0.975 percent. Shorter-term one-week rates hovered near all time lows, edging up to 0.318 percent from 0.317 percent.
Overnight rates fell to 0.340 percent from 0.346 percent.
Dollar-priced bank-to-bank Euribor lending rates were mixed . Three-month rates rose to 0.937 percent from 0.921 percent while overnight rates remained unchanged at 0.316 percent.
The sharp fall in interbank rates over the last few months has brought benchmark euro-priced three-month rates within touching distance of the euro-era low of 0.634 percent hit in early 2010.
The 0.25 percent the ECB offers banks for overnight deposits continues to act as a floor for money market rates as banks know they can get that level of interest no matter what.
High excess liquidity in the banking system has led to heavy use of the ECB's overnight deposit facility, where banks parked 788 billion euros overnight. In normal times the amounts are minimal.
Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 0900 GMT.
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