FRANKFURT: Key euro zone bank-to-bank lending rates hit new 21-month lows on Wednesday, pulled down by the record amount of cash the European Central Bank has flooded financial markets with since late last year.
The ECB gave euro zone banks over 1 trillion euros in 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 again on Tuesday hitting 0.768 percent, the lowest level since June 2010.
Six-month rates fell to 1.067 percent from 1.070 percent and 12-month rates dropped to 1.405 percent from 1.407 percent.
The one-week rate, which continues to bump around all-time lows, remained at 0.317 percent. Overnight rates inched down to 0.343 percent from 0.347 percent.
Newly created dollar-priced bank-to-bank Euribor lending rates moved upward in contrast. 3-month rates rose 0.957 percent from 0.956 percent, while overnight rates climbed to 0.322 percent from 0.319 percent.
Despite the sharp fall in interbank rates over the last few months, the benchmark euro-priced three-month rate remains some way above the euro-era low of 0.634 percent 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 0.25 percent the ECB offers banks for overnight deposits continues to act as a floor for money market rates as banks know they can get that level of interest no matter what.
The central bank'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.
Comments
Comments are closed for this article.