Italy and Spain have been dragged into the debt turmoil over the last two weeks, adding to global financial market worries.
Evidence of the rising tensions was seen at the ECB. Banks borrowed 197 billion euros in its weekly funding handout, well above the 155 billion predicted by traders in a Reuters poll on Monday.
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 -- fell to 1.604 percent from 1.609 percent the previous day.
Six-month Euribor rates fell to 1.810 percent from 1.813 percent while the longer-term 12-month rates bucked the trend and rose to 2.170 percent from 2.169 percent.
Shorter-term one-week Euribor rates fell to 1.369 percent from 1.473 percent. EONIA overnight interest rates fell to 1.467 percent on Tuesday.
Excess money market liquidity is just over 43 billion euros at present according to Reuters calculations, having settled at around 15 billion at the end of the ECB's last reserves period, and is likely to rise further later this week as on Wednesday banks receive the funds they bid for in the main refinancing operation.
Euribor and Eonia futures show markets are now largely pricing out further ECB rate rises following the recent escalation of the debt crisis, although the majority of economists still see at least one more increase this year.
With the euro zone debt crisis continuing to roil the bloc, the central bank continues to offer limit-free funding to banks, a promise that currently runs to mid-October.
While it is back to its pre-crisis range of funding operations, the euro zone debt troubles are preventing it from further normalisation. It recently relaxed its rules on the use of Portuguese government bonds in its refinancing operations.
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.
Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 0900 GMT.
Copyright Reuters, 2011