Having pushed excess liquidity in the banking system to record levels with its December injection of almost half a trillion euros, the ECB will give banks a second chance to get their hands on its limit-free 3-year cash on Feb. 29. The ECB loaned banks 109 billion euros in a 7-day refinancing operation on Tuesday, in line with expectations. With banks already awash with long-term funds and expectations of the uptake for the next round as high as 1 trillion euros, downward pressure on lending rates in the money market is intense. 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 on Tuesday to 1.086 percent from 1.094 percent, hitting the lowest level since late February last year. Rates in other maturities also dropped. Six-month rates fell to 1.385 percent from 1.391 percent, while 1onger-term 12-month rates dropped to 1.717 percent from 1.725 percent. One-week rates - most heavily influenced by excess liquidity, now at 494 billion euros according to Reuters calculations - fell to 0.382 percent from 0.384 percent. Overnight rates slipped to 0.366 percent from 0.377 percent the previous day. While it is still not completely clear whether the money from December's 3-year ECB loan operation is filtering through to companies and consumers, ECB President Mario Draghi said the move had avoided "a major, major credit crunch". The cash is, however, having a clear positive impact on both the money market and euro zone bond markets. Spain and France enjoyed a blast of positive investor sentiment on the back of the money last Thursday with borrowing costs for both falling. Money market experts also report that some banks are now prepared to lend to some of their peers for as long as three months, a marked improvement on last month when even month-long loans were hard to come by in the open market. With high amounts of excess liquidity in the system, banks are depositing much of the extra cash back at the ECB. Overnight deposits at the ECB hit a record high of 528 billion euros at the peak of the ECB's last reserves period and currently stand at a still-hefty 503 billion euros. Short-term market rates are well below the bank's main 1 percent policy rate due to the excess cash. Its 0.25 percent overnight deposit rate is acting as a floor for money markets. Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 1000 GMT.