Key Euribor interbank rates hit month high

FRANKFURT: Key euro-priced bank-to-bank lending rate rose on Thursday, as euro zone crisis-related money market tensions continued to outweigh a new wave of liquidity support from the European Central Bank and possible interest rate cuts.

ECB policymakers' have delivered mixed messages on the possibility of cutting interest rates in recent days, but have been near-united in signalling they are prepared to offer at least one round of ultra-long 12-month funding.

Despite the prospect of more cheap money coming down the pipe, 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 their highest level in a month, to 1.550 percent from 1.544 percent.

Six-month Euribor rates moved up to 1.750 percent from 1.746 percent, while 12-month rates rose to 2.080 percent from 2.075 percent.

Shorter-term one-week rates , most heavily influenced by excess liquidity levels -- currently 187 billion euros, according to Reuters calculations -- moved in the opposite direction, however, dropping to 1.220 percent from 1.228 percent.

Overnight rates fixed at 1.069 percent, down from 1.071 percent the previous day.

Uncertainty created by the debt crisis engulfing much of southern Europe has increased banks' reluctance to lend to each other and prompted many banks to stock up on ECB euro funding.

They took 208 billion euros in one-week funds this week, the highest volume since early February, plus a meaty 140 billion in 3-month funding.

The deepening crisis has already forced the ECB back into emergency mode. It has reintroduced six-month euro funding, a measure it had previously mothballed, and extended limit-free funding in all its lending operations up until mid-January.

The central bank is also back buying sovereign bonds again, although data on Monday showed it slowed purchases last week.

Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 0900 GMT.

Copyright Reuters, 2011