Key Euribor rate rises as liquidity glut fades

Wed Jan 15, 2014 5:57am EST

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FRANKFURT, Jan 15 (Reuters) - The key euro-priced
bank-to-bank lending rate rose on Wednesday as the amount of
surplus funds in the financial system fell, tightening the money
market.
    Excess liquidity, or money banks have beyond
what they need for their day-by-day operations, dipped to 154
billion euros ($211 billion) from 155 billion on Tuesday. 
    The amount had risen to over 280 billion euros towards the
end of last year as banks increased their liquidity buffers to
avert year-end money market tension. 
    As the new year got on its way, excess liquidity came back
down, which increased upward pressure on money market rates.
    Liquidity is draining from the market as banks repay crisis
loans they took from the European Central Bank in late 2011 and
early 2012 to ride out a period of strained funding conditions.
    The repayments will resume this week after pausing over the
turn of the year to avoid a liquidity squeeze. On Friday, the
ECB said banks would return 2.566 billion euros ($3.51 billion)
on Wednesday, which was less than expected in a Reuters poll.
    The three-month Euribor rate, traditionally
the main gauge of unsecured bank-to-bank lending, rose to 0.290
percent on Wednesday from 0.282 percent.
    The six-month Euribor rate rose to 0.397
percent from 0.390 percent and the shorter-term one-week rate
 increased to 0.184 percent from 0.174 percent.
    Overnight Eonia inched lower to 0.147 percent from
0.153 percent on Tuesday. The market moves played out as
European Central Bank policymakers appeared at odds over their
readiness to take fresh policy action.
    Governing Council member Ewald Nowotny said on Tuesday he
saw no need for immediate policy action. But ECB Vice President 
Vitor Constancio said that in the current low-inflation
environment, the ECB can look at some of the instruments at its
disposal to pursue its secondary mandate of lowering
unemployment and fostering growth. 
    
    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'  
    1 week       
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    1 month      
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    3 month      
    6 month      
    9 month      
    1 year       
 ($1 = 0.7353 euros)

 (Reporting by Eva Taylor)
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