Euribor rates dip as Draghi open to ECB rate cut

Mon Nov 12, 2012 5:15am EST

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FRANKFURT, Nov 12 (Reuters) - Key Euribor bank-to-bank
lending rates dipped on Monday after analysts saw an increased
chance of the European Central Bank cutting policy rates in the
months ahead.
    Bank-to-bank lending rates have fallen sharply since last
November when ECB plans emerged to flood the banking system with
ultra-cheap, 3-year cash. The ECB has also cut interest rates to
a record low of 0.75 percent.
    The ECB left interest rates on hold on Thursday, and Draghi
declined to comment when asked whether markets were right to
expect a cut next month. A majority of analysts
in a Reuters poll expected the ECB to reduce rates in the coming
months. 
    Three-month Euribor rates, traditionally the
main gauge of unsecured bank-to-bank lending, eased to 0.192
percent on Monday from 0.193 percent. 
    The six-month rate fell to 0.363 percent from 0.366 percent.
The one-week rate ticked down to 0.078 percent
from 0.079 percent while the overnight Eonia rate eased
to 0.072 percent from 0.087 percent.
    Dollar-priced bank-to-bank Euribor lending rates
  increased, with three-month rates
rising to 0.58769 percent from 0.58462 percent and one-week
rates up to 0.36077 percent from 0.35615 percent.
    The ECB's decision in July to stop paying interest on
overnight deposits paved the way for further declines in
euro-denominated rates by removing the 0.25 percent floor for
the money market.
    The amount of excess cash in the euro zone banking system is
extremely high at about 676 billion euros, according to Reuters
calculations.
    With that figure set to remain high for the foreseeable
future, money market experts have focused on whether the ECB
could copy Denmark's example and start charging banks to deposit
cash overnight. 
    Policymakers showed initial interest in the idea but some
have since expressed reservations. Governing Council member
Ewald Nowotny said last month a negative deposit rate was not
realistic.  
    Asked about the idea on Thursday, Draghi said: "We haven't
discussed (that)."
    
    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 
    * 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)
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