Euribor rates near highest in a yr as excess liquidity drops

FRANKFURT, July 28 (Reuters) - Key euro interbank lending rates hit their highest levels in nearly a year on Wednesday, as expectations banks would continue scaling back use of ECB loans outweighed any confidence boost from last week's stress test results.

The three-month Euribor rate EURIBOR3MD= -- traditionally the main gauge of interbank euro lending and a mix of interest rate expectations and banks' appetite for lending -- rose to 0.896 percent from 0.893 percent the previous day and the highest level since July 30 2009.

Six-month rates EURIBOR6MD= increased to 1.143 percent from 1.141 percent, while one-year rates EURIBOR1YD= rose to to 1.416 percent from 1.413 percent, the highest in a year.

Shorter-term one-week rates EURIBORSWD= followed the trend, rising to 0.585 percent from 0.584 percent.

The rises were despite last week's stress test results giving Europe's banks a reasonably clean bill of health. Bankers hope they will help restore some interbank trust and get lending markets back up to speed.

The overriding factor, however, is the expectation that the level of excess cash in money markets will continue to subside in the coming months, as the ECB scales back its cash injections and banks reduce their reliance on ECB loans.

Excess liquidity has more than halved since the start of the month when banks paid back 442 billion euros worth of ECB one-year loans, while the ECB has currently said that it will provide an unlimited supply of cash only until mid-October, although it is expected to extend the timeframe. [ID:nLDE65D1MF]

The key three-month rate remains comfortably below the ECB's benchmark interest rate, which has been at a record low of 1 percent for well over a year. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For graphic of euro zone liquidity levels click here ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

ECB President Jean-Claude Trichet expressed little concern about the rise in money market rates when asked about the trend earlier this month. [ID:nLDE6670DA] Other ECB members have said they see it as part of the post-crisis normalisation process.

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 EURIBOR=

* 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 EONIAINDEX

* For graphs of historic Euribor and EONIA swap rates, right click on the links in angle brackets below, and select 'Related Graph' 1 week EURIBORSWD= EONIAINDEXSW= 2 week EURIBOR2WD= EONIAINDEX2W= 3 week EURIBOR3WD= EONIAINDEX3W= 1 month EURIBOR1MD= EONIAINDEX1M= 2 month EURIBOR2MD= EONIAINDEX2M= 3 month EURIBOR3MD= EONIAINDEX3M= 4 month EURIBOR4MD= EONIAINDEX4M= 5 month EURIBOR5MD= EONIAINDEX5M= 6 month EURIBOR6MD= EONIAINDEX6M= 7 month EURIBOR7MD= EONIAINDEX7M= 8 month EURIBORS8M= EONIAINDEX8M= 9 month EURIBOR9MD= EONIAINDEX9M= 10 month EURIBOR10MD= EONIAINDEX10M= 11 month EURIBOR11MD= EONIAINDEX11M= 1 year EURIBOR1YD= EONIAINDEX1Y= (Reporting by Frankfurt newsroom; Editing by Susan Fenton)