Looming ECB rate cuts drive Euribor rates to new lows

FRANKFURT, July 20 (Reuters) - Euro zone bank-to-bank
lending rates fell to new all-time lows on Friday, driven down
by record low European Central Bank interest rates and the view
it could take them even lower in the coming months.
The ECB's overnight deposit rate, which it cut to zero on
July 5, acts as a floor for money market rates as banks only
lend to rival banks if they are able to earn a better rate of
interest than at the central bank.
The ECB hopes its unprecedented move, which means banks now
get nothing if they park their spare cash there, will nurture a
return of more significant interbank lending by forcing banks to
look for more profitable options.
Although some money market experts fear the cut could
backfire and kill off parts of the market, the move, plus a
growing belief the ECB could continue to cut rates, has had an
immediate impact on bank-to-bank rates.
Three-month Euribor rates, traditionally the
main gauge of unsecured bank-to-bank lending, hit a new all-time
low of 0.451 percent from 0.458 percent.
Other key rates saw similar drops. Six-month Euribor rates
fell to 0.735 percent from 0.743 percent.
Shorter-term one week rates dipped to 0.113
percent from 0.115 percent while overnight rates ticked
up to 0.120 percent from 0.119 percent.
Euribor rates, like counterpart Libor bank-to-bank rates
, are currently at the centre of a manipulation scandal
after it emerged a number of banks were falsely submitting the
Libor rates they pay.
Dollar-priced three-month bank-to-bank Euribor lending rates
fixed lower at 0.912 percent from
0.919 percent, while overnight dollar rates were more-or-less
flat at 0.339 percent.
The ECB's move to stop paying interest on banks' deposits
saw almost half a trillion euros transferred from the ECB's
deposit facility to banks' current accounts last week.
But with the monthly reserves cycle now in its stride and
fewer options available for banks to juggle their funding, the
money has started to stabilise.
A total of 357 billion euros was parked in the ECB's deposit
facility overnight. Banks' current account deposits at the ECB
dipped to 489 billion euros.

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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(Reporting by Frankfurt newsroom)