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UPDATE 1-Euribor rates rise on prospect of reduced Fed stimulus
June 24, 2013 / 2:57 PM / 4 years ago

UPDATE 1-Euribor rates rise on prospect of reduced Fed stimulus

(Changes dateline, updates throughout)
    By Ana Nicolaci da Costa
    LONDON, June 24 (Reuters) - Euro zone bank-to-bank lending
rates hit new multi-month highs and Euribor futures came under
selling pressure as the prospect of reduced central bank
stimulus prompted investors to dump assets across the board.
    Federal Reserve Chairman Ben Bernanke said last Wednesday
the U.S. economy is expanding strongly enough for the central
bank to begin slowing the pace of its bond-buying stimulus later
this year. 
    The rise in short-term interest rates was expected to pose
an additional obstacle for euro zone economies as officials try
to revive growth and could see the European Central Bank taking
a more accomodative verbal stance, after it disappointed some in
the market at its last monetary policy meeting, analysts said.
    "The bottom line is, all else being equal, the path from
here can be towards higher yields and you really need something
to serve as a catalyst to bring back down some of those moves
higher we've seen at the short end," Simon Peck, rate strategist
at RBS said.
    "We really need some soothing comments from the ECB and some
more dovish rhetoric before we can move lower."
    The three-month Euribor rate, traditionally
the main gauge of unsecured bank-to-bank lending, hit its
highest since February at 0.221 percent, up from 0.216 percent
the previous session.
    The six-month rate also hit its highest since
February at 0.341 percent and the one-month rate 
was at its highest since August 2012 at 0.128 percent. Euribor
futures <0#FEI:> were down sharply across the 2013-2018 strips.
    The overnight Eonia rate rose to 0.084 percent from
0.082 percent. 
    Ultimately, analysts expect a gloomy economic backdrop to
keep the European Central Bank cautious on the euro zone
outlook, limiting the scope for a rise in short-term interest
rates.
    The ECB kept its main refinancing rate unchanged at 0.5
percent on June 6. ECB President Mario Draghi said then the
Governing Council had discussed a raft of options but decided to
leave them on the shelf. But he has also said the central bank
stands ready to act if needed.
    Against that backdrop, RBS's Peck saw value in contracts
showing where one-year Eonia rates will be in one year's time,
which last traded at 0.55 percent.
    "(That's) because we do think the ECB is committed to
maintaining the accommodative monetary stance that Draghi has
reiterated on several occasions," he added.

 (Additional Reporting by Frankfurt newsroom; Editing by Toby
Chopra)

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