Key 3-month bank-to-bank lending rates are at the lowest level in over a year and are closing in on the ECB's benchmark interest rate of 1 percent in anticipation that next Wednesday's second tranche of ECB funds will gush another half a trillion euros into the banking system. 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 further on Thursday to 1.014 percent from 1.021 percent, hitting the lowest level since January last year. Rates in other maturities also dropped. Six-month rates fell to 1.309 percent from 1.315 percent, while 1onger-term 12-month rates dropped to 1.642 percent from 1.648 percent. One-week rates, the most heavily influenced by excess liquidity which currently stands at a massive 476 billion euros according to Reuters calculations, fell to 0.360 percent from 0.362 percent. Overnight rates eased to 0.359 percent from 0.362 percent the previous day. Although they remain well above the low of 0.634 percent they hit in early 2010, 3-month lending rates have dropped by almost a third since the ECB announced plans to lend banks three-year money back in December. In anticipation for next week's tender of 3-year cash, banks have more than halved their intake of 1-month loans and instead increased their use of weekly ECB funds, money they will be easily able to drop again once they have digested the 3-year cash. Thanks to the first 489 billion euro cash-injection in December, banks have been able to stabilise their long-term funding and keep lending to companies and households, ECB Executive Board member Peter Praet said on Monday. The cash is also having a positive impact on both the money market and euro zone bond markets, such as Spain and Italy. 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. Despite the apparent success of the measure, the ECB wants its second 3-year tender to be the last as central bank sources say they are worried banks will become too reliant on the funds. With high amounts of excess liquidity in the system and the money market still dysfunctional, 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 beginning of the year and topped the half a trillion mark again last week at the peak of the ECB monthly reserves cycle. Unlike in normal times, the enormous amounts of excess cash in the money market is keeping short-term market rates well below the ECB's main 1 percent policy rate. The bank's 0.25 percent overnight deposit rate is acting as a floor for market rates. Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 1000 GMT.