Euribor rates decline

The European Central Bank is not expected to cut interest rates again until October at the earliest, money market prices showed on Friday, as traders exited bets for a move in March after the bank gave no hint of further monetary easing any time soon. ECB President Mario Draghi on Thursday pointed to signs the euro zone economy had stabilised recently while warning of big risks to growth, which analysts took as a signal the bank would keep rates steady at 1 percent for the near term.
A Reuters snap survey of 57 economists showed only 14 now think the ECB will cut interest rates by 25 basis points to 0.75 percent next month. By contrast, a regular survey last week showed 41 out of 71 analysts thought the central bank would resume rate cuts before the end of the first quarter.
Calculations based on one-week Eonia rates show money markets are pricing in a 12 percent probability the bank will resume lowering its refinancing rate in October. "You have rather flattish Eonia curve until October ...(which) shows the market is convinced the ECB will continue to carry out its unconventional measures but will not move on the refi rate or conventional policy," said Matteo Regesta, a strategist at BNP Paribas.
Economists at RBC Capital Markets said they were no longer expecting further rate cuts from the ECB, reversing their call before Thursday's ECB meeting for further monetary policy easing in coming months. The ECB's emphasis on some tentative signs of stabilisation in economic activity was consistent with maintaining an expansionary monetary policy, they said. Interbank lending rates kept up their downward trend on Friday after Draghi urged banks to make use of the generous long-term liquidity the central bank will offer later this month.
The ECB also approved an expansion of the type of collateral it accepts at its liquidity operations, which could see banks snap up three-year funds on offer on February 29 after they took up nearly half a trillion euros of the first loans in December. 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 1.063 percent, the lowest level since late January last year. Equivalent London offered interbank rates fixed at 0.99157 percent, its lowest in just over a year and down from 0.99943 percent.