By Luciana Lopez
NEW YORK, Sept 26 (Reuters) - A bearish move in U.S. short-term interest rates could take longer than expected if a rally in stocks and other risky assets peters out on worries about the global economy due to the festering debt problems in the euro zone.
Greece's shaky finances moved back into the spotlight on Wednesday as international lenders admitted to difficulty in working out how to solve the country's three-years-old-and-counting debt crisis while rioters and police clashed in the streets of Athens.
Violent protests in Spain also piled pressure on Spanish Prime Minister Mariano Rajoy to ask for a bailout, with investors unsure how quickly he could bring such a request to European partners.
While RBS analysts wrote that they still have "a bearish outlook for rates over the medium term (3-6 months)" on poor technical conditions in U.S. Treasuries, they noted that a recent risk rally appears to be losing momentum.
The S&P 500 index, for example, has slid for the past five sessions.
"Of immediate concern is that medium term (weekly) charts of key risk markets are not only looking tired, but many are hinting at the beginning of new bear moves," wrote William O'Donnell, John Briggs and Gabriel Mann of RBS.
If the risk rally since early June is indeed taking a breather, the "wait for signs that the oversold correction in Treasuries has run its course could be a long(er) one than imagined earlier," they wrote.
In unsecured lending, the London interbank offered rate, or Libor, on three-month dollars slid to 0.36225 percent, its lowest in a year, from 0.36350 percent on Tuesday.
The rate has sunk almost steadily for about three months, and is well off the 0.58100 percent at the end of last year.
Euro zone banks have cut their borrowing from the European Central Bank as confidence slowly creeps back into the embattled financial sector and reduces the desire to hold large liquidity buffers.
Bank borrowing fell by 7.6 billion euros at the ECB's offer of three-month cash on Wednesday, contributing to a 40 billion decline in excess liquidity in September, according to Reuters data.
Banks still have loans outstanding from the ECB of a huge 739 billion euros above their estimated needs but that amount is edging lower as the latest plans to defuse the euro zone debt crisis improve the outlook for financial institutions.