July 17, 2013 / 9:33 AM / 4 years ago

Euribor rates steady as markets digest ECB guidance

FRANKFURT (Reuters) - Euribor bank-to-bank lending rates were little changed on Wednesday, sticking to a holding pattern after key European Central Bank policymakers qualified the bank's use of forward guidance on low interest rates.

Abandoning its traditional policy of never pre-committing on future rates, the ECB said on July 4 it would keep its interest rates at present or lower levels for an "extended period" - its first use of so-called forward guidance.

But last week Bundesbank chief Jens Weidmann said the ECB had not "tied itself to the mast" with the vow. [ID:nL6N0FH185] Another ECB policymaker, Benoit Coeure, said the bank would decide each and every month whether the pledge was still valid.

On Wednesday, the three-month Euribor rate, traditionally the main gauge of unsecured bank-to-bank lending, ticked up to 0.220 percent from 0.219 percent.

The six-month rate dipped to 0.331 percent from 0.332 percent while the one-week rate was unchanged, at 0.097 percent. The overnight Eonia rate fell to 0.083 percent from 0.086 percent.

Dollar-priced bank-to-bank Euribor lending rates were unchanged, with three-month rates at 0.47000 percent and one-week rates at 0.29286 percent.

Excess liquidity in the euro zone banking sector is at 262 billion euros, still high enough to keep market rates below the ECB's refinancing rate.

ECB President Mario Draghi said in February that he did not expect market rates to face upward pressure until excess liquidity in the banking sector fell below 200 billion euros.

But the ECB said in its monthly bulletin last Thursday: "If excess liquidity remains above a certain threshold, estimated to be in the range of 100 billion to 200 billion euros, short-term money market rates are expected to stay slightly above the deposit rate."

Reporting by Frankfurt newsroom

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