FRANKFURT: Euro zone bank-to-bank lending rates hit fresh 20-month low on Wednesday as the wave of European Central Bank three-year cash recently pumped into the system continued to have a gravitational pull on the money market.
Euribor rates have dropped by more than 40 percent a result of the 1 trillion euros in 3-year loans the ECB has poured into financial markets since 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 0.824 percent on Tuesday from 0.832 the previous day, the lowest level since July 2010.
Rates in longer-term maturities also dropped. Six-month rates fell to 1.127 percent from 1.136 percent and 12-month rates dropped to 1.464 percent from 1.474 percent.
One-week rates, the most heavily influenced by the level of cash in the system, dipped to 0.316 percent from 0.317 percent. Overnight rates eased to 0.350 percent from 0.350 percent.
Despite the sharp fall in interbank rates over the last few months, the benchmark three-month rate remains well above the euro-era low of 0.634 percent they 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 official interest rates at their current record low of 1 percent.
Banks are parking much of the excess cash back at the ECB, however, with the amount at 782 billion euros on Wednesday.
Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 1000 GMT.
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