The ECB is expected to keep rates at a record low of 1 percent on Thursday but may give a steer on future moves. Having injected almost half a trillion euros into the banking system with its first ultra-cheap 3-year loans in December, which pushed excess liquidity to record levels, the ECB will give banks a second chance on February 29. 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 to 1.070 percent from 1.077 percent, hitting the lowest level since late January last year. Rates in other maturities also dropped. Six-month rates fell to 1.370 percent from 1.377 percent, while 1onger-term 12-month rates dropped to 1.702 percent from 1.710 percent. One-week rates, the most heavily influenced by excess liquidity which now stands at 484 billion euros according to Reuters calculations, fell to 0.375 percent from 0.379 percent. Overnight rates inched down to 0.362 percent from 0.367 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 week with borrowing costs falling for both. 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. And while some market players are expecting further long-term loan offerings down the line considering the success of the measure, a top ECB official trashed such hopes by saying bank liquidity concerns had all but disappeared. 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 495 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.