FRANKFURT: Key euro-priced bank-to-bank lending rates ticked up on Wednesday from five-month lows as concerns about bank health outweighed the downward pull of high excess liquidity and this month's ECB interest rate cut.
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.
Banks deposit 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 190 billion euros, data showed on Wednesday.
Banks took 230 billion euros in the central bank's regularly weekly cash handout on Tuesday, well above the 190 billion traders polled by Reuters had expected.
The high demand highlights the tensions that have paralysed major parts of the money market and left banks in debt-strained countries heavily reliant on ECB support.
ECB-fuelled excess liquidity -- currently 238 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.
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 for the first time since Oct. 28, to 1.458 percent from 1.457 percent.
Six-month rates inched up to 1.686 percent from 1.685 percent.
Rates in other maturities fell. The 12-month rates eased to 2.021 percent from 2.022 percent and one-week rates dropped further below 1 percent to 0.908 percent from 0.919 percent. Overnight rates eased to 0.733 percent from 0.738 percent on Tuesday.
Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 1000 GMT.
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