Key Euribor rates continue climb to near-year highs

FRANKFURT, July 29 (Reuters) - Key euro interbank lending rates hit their highest levels in almost a year on Thursday, on expectations that the excess cash in money markets will continue to be whittled back as the ECB normalises its lending tactics.

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 0.899 percent from 0.896 percent the previous day and the highest level since July 30, 2009.

Six-month rates EURIBOR6MD= increased to 1.145 percent from 1.143 percent, while one-year rates EURIBOR1YD= rose to 1.419 percent from 1.416 percent, the highest in a year.

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

The overriding factor for rising Euribor rates is the expectation that the level of excess cash in money markets will continue to subside in the coming months as the European Central Bank scales back its cash injections and banks reduce their reliance on ECB loans.

"Liquidity is going down and you don't know when the ECB is going to say 'stop'," said RBS economist Silvio Peruzzo. "You don't know when the operations are going to be back in variable rates."

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.

The ECB has currently said that it will provide banks with an unlimited supply of cash until mid-October, although it has the option to extend the promise if necessary. [ID:nLDE65D1MF] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For graphic of euro zone liquidity levels click here ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

The key three-month rate remains comfortably below the ECB's record low benchmark interest rate of 1 percent, but has been on a steady upward trend since April.

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)