FRANKFURT: Key Euribor bank-to-bank lending rates eased on Tuesday, resuming their year-long downtrend under the weight of large amounts of excess liquidity in money markets after steadying in the previous session.
Three-month Euribor rates, traditionally the main gauge of unsecured bank-to-bank lending, dipped to 0.203 percent from 0.204 percent. The six-month rate fell to 0.402 percent from 0.405 percent.
The shorter term one-week rate was unchanged at 0.080 percent. The overnight Eonia rate dipped to 0.092 percent from 0.095 percent.
Bank-to-bank lending rates had been falling steadily since November last year when news broke that the ECB was going to flood the banking system with ultra-cheap, three-year cash.
The bank's decision in July to stop paying interest on overnight deposits has allowed the fall to continue by removing the 0.25 percent floor for the money market.
Dollar-priced bank-to-bank Euribor lending rates were mixed, with three-month rates falling to 0.58462 percent from 0.58923 percent and overnight rates rising to 0.30231 percent from 0.30154 percent.
The amount of excess cash in the euro zone banking system is extremely high at about 677 billion euros according to Reuters calculations.
With that figure set to remain high for the foreseeable future, money market experts have focused on whether the ECB could copy Denmark's example and start charging banks to deposit cash overnight. Policymakers showed initial interest in the idea but some have since expressed reservations.
ECB Governing Council member Ewald Nowotny told an investment conference on Friday that current interest rates were appropriate and inflation concerns were not justified.
Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 0900 GMT.
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