The 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 to 1.526 percent from 1.520 percent, the highest since March 2009.

Six-month rates increased to 1.772 percent from 1.770 percent, while longer-term 12-month rates ticked up to 2.148 percent from 2.146 percent.

Shorter-term one-week Euribor rates bucked the trend, however, falling to 1.258 from 1.31. The drop came after backs took 50 billion euros more than expected at the ECB's weekly handout of 7-day funding.

EONIA overnight interest rates fixed at 1.307 percent on Tuesday down from 1.336 on Monday.

The European Central Bank earlier this month signalled it would raise official rates in July, a move economist expect it to follow up with at least one more increase later in the year.

In response to the ongoing money market and debt crisis problems it also extended limit-free liquidity provision to banks for another three months

Banks receive their weekly ECB cash on Wednesday. Overall liquidity dropped to just under 22 billion euros before the injection, down from almost 40 billion the previous day

The ECB is back to its pre-crisis range of funding operations but the debt troubles are preventing it from further normalisation.

Three-month loans are again the longest maturity on offer and banks have now paid back all the six-month and 12-month loans the ECB injected at the height of the turmoil.

COPYRIGHT REUTERS, 2011