Euribor rates inch higher as ECB rate decision nears

Tue Dec 4, 2012 5:21am EST

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FRANKFURT, Dec 4 (Reuters) - Key Euribor bank-to-bank
lending rates ticked up on Tuesday as expectations for a cut in
interest rates at Thursday's European Central Bank policy
meeting faded. 
    Bank-to-bank lending rates have fallen sharply since
November last year when ECB plans emerged to flood the banking
system with ultra-cheap, three-year cash. 
    But the impact of the excess liquidity has now been largely
priced in and there is uncertainty about whether the ECB will
cut interest official rates further, helping market rates find
support.
    Only a handful of the 71 economists polled by Reuters last
week said the ECB will trim its main rate from 0.75 percent to
0.5 percent on Thursday. They were split down middle over the
possibility of a rate cut early next year. 
    Three-month Euribor rates, traditionally the
main gauge of unsecured bank-to-bank lending, inched up to 0.191
percent from 0.190 percent, having stayed close this level in
previous sessions.
    The six-month rate eased to 0.341 percent from 0.342 percent
and the one-week rate inched up to 0.077 percent
from 0.076 percent. The overnight Eonia rate remained
unchanged at 0.077 percent.
    Dollar-priced bank-to-bank Euribor lending rates
  were mixed, with three-month rates
falling to 0.57462 percent from 0.57615 percent and one-week
rates rising to 0.35000 percent from 0.34769 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
still extremely high at 634 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. Asked about the idea last
month, 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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($1 = 0.7867 euros)

 (Reporting by Frankfurt newsroom; Editing by Catherine Evans)
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