Key euro zone bank-to-bank lending rates continued to head south on Friday as rising excess liquidity in the banking system, the recent ECB policy rate cut and its plans to pump 3-year liquidity into the system, kept downward pressure on them. On Tuesday, banks borrowed almost 300 billion euros ($390 billion) from the ECB's weekly handout of limit-free cash, the largest amount since June 2009.
The money was the first offered at the ECB's new, lower interest rate of 1.0 percent and comes just a week before it will offer banks 3-year funding for the first time in its history. Three-month Euribor rates, traditionally the main gauge of unsecured interbank euro lending and a mix of interest rate expectations and banks' appetite for lending, fell to 1.417 percent from 1.419 percent.
Longer-term rates remained at the previous day's levels. Six-month rates were unchanged at 1.667 percent and 12-month rates flat at 2.001 percent. Shorter-term one-week rates - most heavily influence by excess liquidity, which rose to a hefty 308 billion euros according to Reuters calculations -fell to 0.760 percent from 0.762 percent.
Overnight rates fell to 0.571 percent from 0.579 percent, the lowest level since April. The recent intensification of the euro zone debt crisis has left a growing pack of banks locked out of open funding markets and reliant on the ECB. The 292 billion euros weekly take up of ECB cash was well above the 250 billion expected by traders polled by Reuters. Banks also took an additional 41 billion euros in one-month funding.