FRANKFURT: Key euro-priced bank-to-bank lending rates rose on Thursday, as the euro zone's intensifying debt crisis continued to paralyse the money market and strengthen banks' reluctance to lend to each other.
Spiralling fears about the financial health of Greece and now also Italy and Spain have gradually frozen up interbank lending markets over the last fortnight.
Demand for ECB funding surged to a two-year high earlier this week, underscoring the fact that the central bank is now the only liquidity option for many banks in the euro zone's trouble spots.
A weak German debt auction on Wednesday also raised fears the crisis was starting to threaten even Berlin.
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, continued a week-long climb, rising to 1.474 percent from 1.471 percent.
Six-month rates edged up to 1.702 percent from 1.698 percent while 12-month rates were higher at 2.038 percent from 2.033 percent.
Shorter-term one-week rates -- most heavily influenced by excess liquidity, which currently stands at a hefty 259 billion euros according to Reuters calculations -- remained at 0.909 percent.
Overnight rates fell to 0.722 percent from 0.724 percent.
The ECB has reinstated some of its most potent crisis-fighting tools in recent months in a bid to ease tensions again, including ultra-long, limit-free one year liquidity injections.
But the moves have done little to revive interbank lending.
Banks are now borrowing more than 500 billion euros from the ECB. But data show almost two-thirds of that money is being deposited back at the central bank, compared with around one third after the collapse of Lehman Brothers back in 2008.
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