* Take up of 7-day ECB funding announced at around 1000 GMT
* Markets on lookout for signs of restocking after LTRO repayment
* Three-month funding to be also offered on Wednesday
By Marc Jones
LONDON, Jan 29 (Reuters) - Money markets are preparing for a lively couple of days as banks get two chances to replace the three-year ECB crisis loans they will repay this week with alternative shorter-term funding.
On Wednesday banks will return 137.2 billion euros - just over a quarter - of the 489 billion euros they borrowed in the first of the ECB's twin three-year loan offerings just over a year ago.
When the ECB announced the larger-than-expected amount on Friday, wholesale bank funding prices jumped as markets realised it removed a thick slice of the 600 billion euros of so-called 'excess liquidity' which has kept rates pinned to the floor for over a year.
That money can potentially be re-borrowed, however. Later on Tuesday banks get their usual weekly opportunity to order seven-day ECB funding and on Wednesday there is a monthly offering of three-month loans. They will receive the money on Wednesday and Thursday.
A major take-up in either of the tenders would reduce the impact of the three-year loan payback and send market rates back down.
But the latest Reuters poll suggests there will be no major restocking. Banks are expected to take just 14 billion euros more combined than they did in the two equivalent operations a week and three months ago.
If correct, it means once dust of the three-year loan repayment settles the overall amount of cash in the banking system would have been cut by around 120 billion euros.
Traders think that market rates could give back some of their recent gains once it is all out of the way, but not much.
Benchmark three-month Euribor rates hit their highest level in four months on Monday while one-year eonia rates are at their highest since mid-June.
"I would expect a little bit bigger amount in the one-week and the three-month tender but not that big. Maybe after everything there would be an overall reduction of around 100 billion euros," said one euro zone-based trader who requested anonymity
"I would think 12- and 6- month eonia perhaps would come back down a little bit and then we will see where we go from there," he added. (Reporting by Marc Jones; editing by Stephen Nisbet)