Eurozone money markets showed no sign of rising strain on Friday after emergency borrowing from the European Central Bank spiked for a second day on Friday, with interbank rates slipping further on a liquidity surplus. ECB figures showed banks borrowed more than 16 billion euros ($21 billion) in high-cost emergency overnight funding, the highest amount since June 2009 and well above the 1.2 billion euros which banks were taking before the figure first jumped on Thursday.
It was not clear why the borrowing was so high. Traders said they were waiting for weekly central bank liquidity figures due next week to get a better idea of why such borrowing has increased.
If the sudden spike was down to an error, the distortion could last until the ECB's next 7-day funding operation on Tuesday. London interbank offered rates for overnight to one-year euros slipped, with the benchmark three-month rate fixed at 1.03250 percent from 1.03750 percent on Thursday.
The equivalent 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 - eased to 1.078 percent from 1.086 percent. Overnight rates dipped further below the ECB's refinancing rate of 1 percent, fixing at 0.625 percent. Excess liquidity currently stands at around 48 billion euros, according to Reuters calculations, and is seen ample enough in the coming week to drive overnight EONIA even lower.