FRANKFURT: Key euro zone bank-to-bank lending rates fell to the lowest level since May on Monday, as money markets continued to react to last week's ECB rate cut and its decision to start providing banks with 3-year liquidity.
The ECB cut rates back to a record low of 1.0 percent last week and announced plans for two handouts of ultra-long 3-year financing and changes to make it easier for banks to access its funding.
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, continued to fall on the back of the moves on Monday, falling to 1.430 percent from 1.437 percent, the lowest level since May.
Six-month rates remained at 1.675 percent, while 12-month rates fell to 2.008 percent from 2.012 percent.
Shorter-term one-week rates -- most heavily influenced by excess liquidity, a hefty 266 billion euros according to Reuters calculations -- slid to 0.800 percent from 0.831 percent.
The ECB's new lower interest rate won't actually kick in until Tuesday. As a result overnight rates bucked the wider trend, fixing up at 0.735 percent on Friday from 0.727 percent.
The recent intensification of the euro zone debt crisis has left a growing pack of banks locked out of open funding markets and reliant on the ECB.
Banks trimmed their intake of ECB funding last week by just over 10 billion euros to 252 billion euros. However, demand for the bank's first offering of new lower-cost dollar funding was far above expectations, with banks taking more than $50 billion versus the $10 billion traders polled by Reuters had forecast.
Overnight deposits also remained extremely elevated on Monday at 335 billion euros. Emergency overnight borrowing stayed high at over 7.4 billion euros.
Comments
Comments are closed for this article.