Euribor rates fall to 11-month lows

FRANKFURT, Feb 6 (Reuters) - Euro priced bank-to-bank
lending rates continued their slide towards the 1 percent mark
on Monday, as the money market readied itself for another huge
dump of ultra-cheap 3-year loans from the European Central Bank
at the end of the month.
Having pushed excess liquidity in the banking system to
record levels with its December injection of almost
half a trillion euros, the ECB will give banks a second chance
to get their hands on its limit-free 3-year cash on Feb. 29.
With banks already awash with long-term funds and
expectations of the uptake for the next round as high as 1
trillion euros, downward pressure on lending rates in the money
market is intense.
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
on Monday to 1.094 percent from 1.102 percent, hitting the
lowest level since late February last year.
Rates in other maturities also dropped. Six-month rates
fell to 1.391 percent from 1.396 percent, while
1onger-term 12-month rates dropped to 1.725
percent from 1.732 percent.
One-week rates - most heavily influenced by
excess liquidity, now at 492 billion euros according to Reuters
calculations - fell to 0.384 percent from 0.387 percent.
Overnight rates bucked the trend, inching up to 0.377
percent from 0.366 percent the previous day.
While it is still not completely clear whether the money
from December's 3-year ECB loan operation is filtering through
to companies and consumers, ECB President Mario Draghi said the
move had avoided "a major, major credit crunch".
The cash is, however, having a clear positive impact on both
the money market and euro zone bond markets. Spain and France
enjoyed a blast of positive investor sentiment on the back of
the money on Thursday with borrowing costs for both falling.

Money market experts also report that some banks are now
prepared to lend to some of their peers for as long as three
months, a marked improvement on last month when even month-long
loans were hard to come by in the open market.
With high amounts of excess liquidity in the system, banks
are currently depositing much of the extra cash back at the ECB.
Overnight deposits at the ECB hit a record high of 528
billion euros at the peak of the ECB's last reserves period and
currently stand at a still-hefty 511 billion euros.
Short-term market rates are well below the bank's main 1
percent policy rate due to the excess cash. Its 0.25 percent
overnight deposit rate is acting as a floor for money markets.

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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(Reporting by Frankfurt newsroom)