Longer-term euro-priced bank-to-bank lending rates inched lower on Monday, pushed down by excess market liquidity and the ECB's promise to keep providing banks with unlimited cash until at least April. 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 - remained unchanged at 1.014 percent.
Six-month rates dipped to 1.241 percent from 1.243 percent and longer-term 12-month rates fell to 1.520 percent from 1.521 percent. Shorter-term one-week rates moved in the opposite direction, rising to 0.684 percent from 0.666 percent. Overnight rates fixed higher at 0.396 percent on Friday.
The three-month Euribor rate broke above the European Central Bank's 1.0 percent benchmark rate for the first time in well over a year in October, marking a milestone in money markets' return to normality. However, rates have been dropping back again in recent weeks and the ongoing problems in the eurozone forced the ECB to extend its limit-free lending to banks this month, a move likely to keep money markets heavily oversupplied until April.
There is currently 51 billion euros of excess liquidity in eurozone money markets according to Reuters calculations. While banks will still have the security of unlimited ECB funding for the early part of next year, the central bank will almost be back to its pre-crisis range of funding offerings by January.
Three-month loans will again be the longest maturity on offer and banks have now paid back all the 6-month and 12-month loans the ECB injected during the financial crisis. The central bank is expected to keep interest rates on hold at a record low of 1 percent next month. Economists polled by Reuters currently expect the bank to keep them there until the fourth quarter of 2011. Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 1000 GMT.
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