FRANKFURT: Key euro zone bank-to-bank lending rates hit a new 21-month lows on Monday as the European Central Bank's injection of over 1 trillion euros into the euro zone's financial system over the past couple of months continued to exert downward pressure.
The ECB gave euro area banks over 1 trillion euros in the form of 3-year loans in December and February to revive the inter-bank lending market. Since the first dose in December, Euribor rates have fallen by about 45 percent.
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 0.771 percent from 0.777 percent, the lowest level since the late June 2010.
Rates in longer-term maturities also dropped. Six-month rates fell to 1.072 percent from 1.078 percent and 12-month rates dropped to 1.410 percent from 1.416 percent.
The one-week rate, which continues to bump around all-time lows, bucked the trend and inched up 0.318 percent from 0.316 percent. Overnight rates also rose, to 0.388 percent on Friday from 0.349 percent the previous day.
The ECB offers banks 0.25 percent for overnight deposits, a rate that marks a floor for market rates.
Despite the sharp fall in interbank rates over the last few months, the benchmark three-month rate remains above the euro-era low of 0.634 percent it hit in early 2010.
Futures markets see further falls, however, on expectations the ECB will keep limit-free liquidity available for the foreseeable future and that official interest rates stay at their current record low of 1 percent for an extended spell.
The ECB's recent cash injections have helped the money market but the situation remains difficult. Banks are parking much of their excess cash back at the ECB's overnight facility, with the latest data showing the amount at 779 billion euros.
Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 0900 GMT.
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