FRANKFURT: Key euro zone bank-to-bank lending rates fell further on Thursday as high levels of liquidity in the banking system and the European Central Bank's recent policy rate cut kept downward pressure on them.
On Tuesday, banks borrowed almost 300 billion euros ($390 billion) from the ECB's weekly handout of limit-free cash, the largest amount since June 2009.
The money was the first offered at the ECB's new, lower interest rate and comes just a week before it will offer banks 3-year funding for the first time in its history.
The move, combined with a reduction in borrowing costs to 1.0 percent, taken by the ECB last week, has applied fresh downward pressure on lending rates in crisis-hit money markets.
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 to 1.419 percent from 1.423 percent.
Six-month rates dipped to 1.667 percent from 1.669 percent, while 12-month rates fell to 2.001 percent from 2.005 percent.
Shorter-term one-week rates - most heavily influenced by excess liquidity, which jumped to 292 billion euros according to Reuters calculations after the ECB returned banks the money from an overnight drain operation - slid to 0.762 percent from 0.767 percent.
Overnight rates fell to 0.579 percent from 1.018 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.
The 292 billion euros weekly take up of ECB cash was well above the 250 billion expected by traders polled by Reuters. Banks also took an additional 41 billion euros in one-month funding.
Copyright Reuters, 2011
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