Key Euribor rate climbs on bank worries

Key euro-priced bank-to-bank lending rates ticked up on Friday as the sovereign debt crisis intensified worries about the health of the euro zone banking sector. Banks are depositing large amounts of money at the ECB's overnight facility at a lower rate rather than lending money to each other as they seek to limit their risk exposure.
Overnight deposits rose to 231 billion euros, data showed on Friday and the key 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 1.465 percent from 1.460 percent.
The European Central Bank has reinstated some of its most potent crisis-fighting tools in recent months, including one-year liquidity injections, although the moves have done little to kick-start interbank lending. Spain paid the highest interest rate to sell its 10-year debt since 1997 on Thursday, just shy of the 7 percent mark seen as unsustainable, as the country is swept deeper into the debt crisis.
ECB-fuelled excess liquidity - currently 263 billion euros according to Reuters calculations - is expected to remain for the foreseeable future and maintain downward pressure on interbank rates. Interbank market rates have fallen sharply since the ECB cut rates by 25 basis points to 1.25 percent this month and warned the euro zone could be heading back into recession, but have crept back up for the last two days.
Six-month rates inched up to 1.694 percent from 1.690 percent and 12-month rates rose to 2.031 percent from 2.024 percent. Shorter-term one-week rates - most heavily influenced by excess liquidity - bucked the trend and remained at 0.906 percent. Overnight rates eased to 0.709 percent from 0.728 percent on Thursday.