Saturday, September 03, 2011

Euribor 3-month rates edge up on economy, banks angst

Key euro-priced bank-to-bank lending rates edged higher on Thursday, pushed up by concerns about the outlook for the economy and euro zone banks that outweighed downward pressure from an excess of liquidity in the system.

A worsening euro zone debt crisis and fears a recession is looming have seen money markets freeze up and prompted banks to stock up on limit-free ECB funding, pushing liquidity back to exceptionally high levels.

The three-month Euribor rate -- traditionally the main gauge of unsecured interbank euro lending and a mix of interest rate expectations and banks' appetite for lending ticked up to 1.543 percent from 1.542 percent.

Six-month Euribor rates eased to 1.748 percent from 1.749 percent, while 12-month rates were unchanged at 2.089.

One-week Euribor rates , most heavily influenced by excess liquidity -- currently at just under 95 billion euros according to Reuters calculations dipped to 1.098 percent from 1.101 percent.

Overnight rates rose to 0.955 percent on Wednesday from 0.865 percent, but were still well below the ECB's 1.5 percent headline interest rate .

The excess liquidity bloating money markets and keeping downward pressure on some bank-to-bank lending rates is set to remain high.

Banks took 122 billion euros in the ECB's latest offering of 3 month loans on Tuesday, slightly below expectations of 130 billion. They also took 49.4 billion in the latest handout of 3-month loans bang in line with forecasts of 50 billion.

There were no takers for the ECB's offering of dollar funding for the second week running on Wednesday, helping ease fears about euro zone banks' access to dollar markets, after the facility was used late last month for the first time since February.

The central bank also reintroduced six-month funding last month, a crisis tactic it had previously mothballed, while it also extended limit-free funding in all its lending operations up until mid-January.

Most significantly, it has also started buying sovereign bonds again, spending almost 45 billion since reactivating the controversial purchases early last month. (for latest stories click )

Euribor futures <0#FEI:> show markets have priced out further interest rate hikes for the next couple of years and now see a good chance the ECB may revert back to rate cuts as early as December. (for analysis click )

Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 0900 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


Camilla Stuart said...

In spite of the recession and the hard time the euro zone is going through I am quite optimistic and beleive that the difficult period will pass away soon. Regards!

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Angie Homes said...

I am sure that the recession will be over and there will be some relief for the euro zone, especially for the countries form Eastern Europe, where the situation is very tough right now.

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