Euribor 3-month rates steady for second day running

A worsening euro zone debt crisis and fears a recession is looming have seen money markets freeze up and prompted banks to stock up on limit-free ECB funding, pushing liquidity back to exceptionally high levels.

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 -- remained at 1.540 percent.

Six-month Euribor rates inched up to 1.747 percent from 1.745 percent, while 12-month rates crept to 2.085 percent from 2.084.

One-week Euribor rates , most heavily influenced by excess liquidity -- currently at 106 billion euros according to Reuters calculations -- bucked the trend and eased to 1.104 percent from 1.109 percent.

Overnight rates meanwhile dropped to 0.869 percent on Monday from 0.874 percent, well below the ECB's 1.5 percent headline interest rate.

Banks took 121.7 billion euros in the ECB's latest offering of 7-day funding on Tuesday, below expectations of 130 billion. It is also due to hand out 3-month money on Wednesday.

There were no takers for the ECB's offering of dollar funding last Wednesday, helping ease fears about euro zone banks' access to dollar markets, after the facility was used the previous week for the first time since February.

Earlier this month the central bank also reintroduced six-month funding, a crisis tactic it had previously mothballed, while it also extended limit-free funding in all its lending operations up until mid-January.

Copyright Reuters, 2011