Key euro-priced bank-to-bank lending rates fell for the 10th session running on Friday, hitting a new five-month low as last week's surprise ECB interest rate cut and excess liquidity continued to weigh on money markets. The European Central Bank cut rates by 25 basis points to 1.25 percent last week as it warned the eurozone could slide into a mild recession by the end of the year.
Interbank market rates have fallen sharply in the wake of the cut. 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 Friday, to 1.462 percent from 1.464 percent and the lowest since mid-June.
Six-month Euribor eased to 1.688 percent from 1.689 percent while 12-month rates eased to 2.032 percent from 2.033 percent. Shorter-term rates fell further below 1 percent. One-week rates fell to 0.926 percent from 0.932 percent. On Thursday, overnight rates fell to 0.736 percent from 0.769 percent, easing after a jump at the end of the ECB maintenance period, as is normal.
The ECB reinstated some of its most potent crisis-fighting tools last month, including one-year liquidity injections, although the moves have done little to suggest they will kick-start interbank lending. ECB liquidity is expected to keep the euro money market heavily oversupplied for the foreseeable future and maintain downward pressure on interbank rates Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 1000 GMT.
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