Bank-to-bank Euribor rates extend post-ECB cash drop

FRANKFURT, Jan 4 (Reuters) - Key euro zone
bank-to-bank lending rates continued to drop on Wednesday,
pulled down by the ECB's recent record injection of almost half
a trillion euros of ultra-long and ultra-cheap three-year
liquidity.
Euro zone banks received 489 billion euros late last month
in the first of two opportunities to access the long-term loans
-- operations the ECB hopes will minimise the chances of them
responding to the region's debt crisis by slashing lending.
The move has ballooned the amount of excess cash in the
financial system, and with the traditionally tense end-of-year
period now in the rearview mirror for money markets the huge
overhang is beginning to exert a freer influence on lending
rates.
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 1.319 percent from Tuesday's 1.333 percent.
Longer-term rates also dropped. Six-month rates
eased to 1.586 percent from 1.598 percent, while
12-month rates dropped to 1.918 from 1.930
percent.
One-week rates -- most heavily influenced by
excess liquidity, which sits at a staggering 445 billion euros
according to Reuters calculations -- fell to 0.606
percent from 0.626 percent.
Overnight rates bucked the trend, edging up to
0.396 percent from 0.390 percent.
Despite being awash with liquidity, the euro zone's
sovereign debt worries mean banks still lack the trust to lend
to each other and prefer to hoard their money at the ECB.
Latest figures show banks deposited an all-time record 453
billion euros at the central bank overnight. Emergency overnight
borrowing also remained extremely high at just over 15 billion
euros.
Bloated after gorging themselves at last month's 3-year cash
handout, banks trimmed their intake of 1-week funding on Tuesday
to 130 billion euros. On Wednesday they also halved the amount
of dollar funding they took from the ECB, to $25 billion from
$50 billion.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
Graph'
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