Key Euribor rate rises to 16-month high

Thu Jan 16, 2014 5:24am EST

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FRANKFURT, Jan 16 (Reuters) - The key euro-priced
bank-to-bank lending rate rose on Thursday to its highest level
since August 2012 as the amount of surplus funds in the
financial system fell to a two-year low, tightening money market
conditions.
    Excess liquidity, or money banks have beyond
what they need for their day-by-day operations, decreased to 131
billion euros from 154 billion on Wednesday. 
    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 resumed this week after pausing over the turn
of the year to avoid a liquidity squeeze. 
    The three-month Euribor rate, traditionally
the main gauge of unsecured bank-to-bank lending, rose to 0.300
percent from 0.290 percent.
    The six-month Euribor rate rose to 0.405
percent from 0.397 percent and the shorter-term one-week rate
 increased to 0.210 percent from 0.184 percent.
    Overnight Eonia rose to 0.210 percent from 0.147
percent at the end of the reserves maintenance period. 
     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       
    2 week       
    1 month      
    2 month      
    3 month      
    6 month      
    9 month      
    1 year       
 ($1 = 0.7353 euros)

 (Reporting by Eva Taylor)
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