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Euribor rates rise as ECB seen on hold
November 29, 2012 / 10:26 AM / 5 years ago

Euribor rates rise as ECB seen on hold

FRANKFURT, Nov 29 (Reuters) - Key Euribor bank-to-bank
lending rates rose for the first time in four weeks on Thursday,
adding to signs they have found a floor as expectations for
further interest rate cuts by the European Central Bank fade.
    Bank-to-bank lending rates have fallen sharply since last
November when ECB plans emerged to flood the banking system with
ultra-cheap, three-year cash. 
    But the impact of the excess liquidity has now been largely
priced in and there is uncertainty about whether the ECB will
cut interest official rates further, helping support market
rates.
    Only a handful of the 71 economists polled by Reuters this
week said the ECB will trim its main rate from 0.75 percent to
0.5 percent next Thursday. They were split down middle over the
possibility of a rate cut early next year. 
    Three-month Euribor rates, traditionally the
main gauge of unsecured bank-to-bank lending, edged up to 0.190
percent from 0.188 percent, marking the first gain since the end
of October.
    The six-month rate fell to 0.345 percent from 0.347 percent
and the one-week rate inched up to 0.078 percent
from 0.077 percent. The overnight Eonia rate rose to
0.073 percent from 0.072 percent.
    Dollar-priced bank-to-bank Euribor lending rates
  were mixed, with three-month rates
falling to 0.59692 percent from 0.60769 and one-week rates
remaining at 0.36000 percent.
    The ECB's decision in July to stop paying interest on
overnight deposits paved the way for further declines in
euro-denominated rates by removing the 0.25 percent floor for
the money market.
    The amount of excess cash in the euro zone banking system is
still extremely high at 631 billion euros, according to Reuters
calculations.
    With that figure set to remain high for the foreseeable
future, money market experts have focused on whether the ECB
could copy Denmark's example and start charging banks to deposit
cash overnight.
    Policymakers showed initial interest in the idea but some
have since expressed reservations. Governing Council member
Ewald Nowotny said last month a negative deposit rate was not
realistic.  
    Asked about the idea earlier this month, Draghi said: "We
haven't discussed (that)."
    
    Euribor rates are fixed daily by the Banking Federation of 
the European Union (FBE) shortly after 0900 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'  
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($1 = 0.7867 euros)

 (Reporting by Frankfurt newsroom)

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