Key Euribor rate inches up as excess liquidity hits 26 month-low

Fri Feb 21, 2014 5:44am EST

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FRANKFURT, Feb 21 (Reuters) - The key euro-priced
bank-to-bank lending rate inched higher on Friday as the amount
of money banks have beyond what they need for their day-to-day
operations fell to the lowest level since December 2011.
    That was just before the ECB flooded the market with more
than 1 trillion euros ($13.71 trillion) in cheap loans to ease
banks' funding strains, which pushed the level of excess
liquidity to as high as around 800 billion euros in
early 2012.
    On Friday, it stood at 121 billion euros. Banks have started
to repay the crisis loans, relying less on the central bank for
funding in a sign of returning confidence. This development
exerts upwards pressure on interbank lending rates.         
    On Friday, the three-month Euribor rate,
considered the main gauge of unsecured bank-to-bank lending,
inched up to 0.287 percent from 0.286 percent.
    The six-month Euribor rate stayed 0.384
percent. The shorter-term one-week rate remained
unchanged at 0.192 percent.
    The EONIA overnight lending rate rose to 0.169
percent on Thursday from 0.164 percent in the previous session.
    ECB Executive Board member Benoit Coeure last week described
the situation on money markets as a kind of normalisation,
saying market participants were learning to adapt to an
environment with a lower level of excess liquidity.
    But the ECB remains vigilant and said it would intervene in
case of an unwarranted increase in short-term money market rates
or a worsening of the medium-term outlook for inflation. 
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
    For a package of graphics on the ECB, click on:     
    link.reuters.com/neg32s   
    For graphic of euro zone liquidity levels click:       
    link.reuters.com/qeq25s 
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
    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 = 0.7293 euros)

 (Reporting by Frankfurt newsroom; Editing by Toby Chopra)
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