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Euribor rates dip after ECB rate cut discussion
December 10, 2012 / 10:24 AM / 5 years ago

Euribor rates dip after ECB rate cut discussion

FRANKFURT, Dec 10 (Reuters) - Key Euribor bank-to-bank
lending rates eased on Monday after European Central Bank
policymakers discussed cutting official interest rates last
Thursday before leaving them unchanged at 0.75 percent. 
    ECB President Mario Draghi said last Thursday there had been
"a wide discussion" on rate cuts during the Governing Council
meeting - a comment that fuelled expectations the ECB is ready
to lower rates further in the coming months.  
    Bank-to-bank lending rates have fallen sharply since
November last year when ECB plans emerged to flood the banking
system with ultra-cheap, three-year cash. 
    The impact of the excess liquidity has now been largely
priced in but expectations after last Thursday's policy meeting
that the ECB will cut official rates again are weighing on
interbank lending rates.
    On Friday, three-month Euribor rates,
traditionally the main gauge of unsecured bank-to-bank lending,
fell to 0.183 percent from 0.187 percent.
    The six-month rate eased to 0.322 percent from 0.330 percent
while the one-week rate held steady at 0.077
percent. The overnight Eonia rate was also unchanged at
0.072 percent.
    Dollar-priced bank-to-bank Euribor lending rates
  were firmer, with three-month rates
rising to 0.57385 percent from 0.57231 percent and one-week
rates up at 0.34846 percent from 0.34692 percent in the previous
session.
    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 616 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 said such a move could be problematic. 
    Asked about the idea last Thursday, Draghi said: "There is
nothing new to report ... we are operationally ready, but the
discussions in this respect did not go into any depth."
    "We briefly touched upon the complexities that such measure
would involve and on possible unintended consequences. But we
did not elaborate on this any further," he added.
    
    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; Editing by Catherine Evans)

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