February 14, 2014 / 10:32 AM / 4 years ago

Key Euribor rate falls after negative rate talk

FRANKFURT, Feb 14 (Reuters) - The key euro-priced
bank-to-bank lending rate fell on Friday after a top European
Central Bank policymaker said the ECB was "considering very
seriously" the idea of cutting its deposit rate below zero.
    Executive Board member Benoit Coeure said on Wednesday the
idea of cutting into negative territory the rate the ECB pays
banks to hold their deposits overnight was "a very possible
option" to help money flow more evenly across the euro area.
    "Liquidity is not flowing smoothly across the euro zone, the
market remains fragmented," he told Reuters. 
    Last month, a sharp drop in excess liquidity, or the amount
of money banks have beyond what they need for their day-to-day
operations, pushed overnight lending rates above the ECB's main
refinancing rate several times. 
    Coeure said that a wider fluctuation of the overnight
bank-to-bank lending rate was likely as the gap between the cost
of borrowing from the ECB and other banks narrows.
    He said the ECB would not intervene to stop this as long as
volatility was not excessive.
    "As long as this is a stable process, I think it is fine,"
he said.
    Excess liquidity is now at 146 billion euros,
but overnight rates have remained well below the 0.25 percent
refi rate. The EONIA overnight lending rate fell to
0.159 percent on Thursday from 0.170 percent in the previous
    In January, ECB President Mario Draghi said an unwarranted
increase in short-term money market rates and a worsening of the
medium-term outlook for inflation could trigger more policy
    The three-month Euribor rate, traditionally
the main gauge of unsecured bank-to-bank lending, fell to 0.287
percent from 0.288 percent.
    The six-month Euribor rate decreased to 0.386
percent from 0.387 percent while the shorter-term one-week rate
 inched up to 0.190 percent from 0.189 percent.
    For a package of graphics on the ECB, click on:     
    For graphic of euro zone liquidity levels click:       
    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
    1 week       
    2 week       
    1 month      
    2 month      
    3 month      
    6 month      
    9 month      
    1 year       

 (Reporting by Frankfurt newsroom)

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