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Euribor hits new 16-month low after ECB cash wave
March 1, 2012 / 10:31 AM / in 6 years

Euribor hits new 16-month low after ECB cash wave

 FRANKFURT, March 1 (Reuters) - Euro-priced
bank-to-bank lending rates fell further below the European
Central Bank's benchmark lending rate of 1 percent on Thursday
after banks took 530 billion euros in the ECB's second 3-year
loan handout, intensifying downward pressure on rates.	
 The second dose of cheap ECB money came after banks took 489
billion euros in the ECB's December tranche and is seen pushing
bank-to-bank lending rates close to record lows last seen in
March 2010, after banks receive the fesh funds on Thursday. 	
 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 0.967 percent from 0.983 percent, hitting the lowest level
since October 2010 and recording their biggest daily drop since
early January.	
 Rates in other maturities also dropped. Six-month rates
 fell to 1.267 percent from 1.279 percent, while
1onger-term 12-month rates dropped to 1.599
percent from 1.614 percent.	
 Shorter-term one-week rates, the most heavily
influenced by excess liquidity which currently stands at a
massive 484 billion euros according to Reuters
calculations, ticked down to 0.347 percent from 0.357 percent,
while overnight rates bucked the trend, inching up to
0.374 percent from 0.360 percent the previous day.	
 The 3-month lending rates have already dropped by roughly a
third since the ECB announced plans to lend banks three-year
money back in December, but are still well above the low of
0.634 percent they hit in early 2010. 	
 But after Wednesday's second dose of ultra-long funds, which
will be paid out on Thursday, the market now believes that rates
may well get close to 2010-levels. 	
 Euribor futures <0#FEI:> showed markets were anticipating
rates to fall to 0.69 percent by June, with an
additional drop to 0.67 percent by September. 	
 The ECB's looser collateral rules helped banks - especially
smaller ones - to get their hands on the cheap 3-year loans. In
total, 800 banks took part, more than the 523 in December. 	
 Thanks to the first cash injection in December, the euro
zone managed to avoid a credit crunch as bank lending to
companies stabilised in January, ECB data showed 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.
 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
 Euribor rates are fixed daily by the Banking Federation of 
the European Union (FBE) shortly after 1000 GMT.	
 * For a table of the latest Euribor fixings for terms of one
week to one year, double click on 	
 * For a table of the previous day's fixings of EONIA swap 
rates, which show market expectations for future overnight 
lending rates, double click on 	
 * For graphs of historic Euribor and EONIA swap rates, right
click on the links in angle brackets below, and select 'Related 
 1 week       	
 2 week       	
 3 week       	
 1 month      	
 2 month      	
 3 month      	
 4 month      	
 5 month      	
 6 month      	
 7 month      	
 8 month      	
 9 month      	
 10 month    	
 11 month    	
 1 year       	
 (Reporting Frankfurt newsroom)	

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