July 16, 2012 / 9:23 AM / 5 years ago

Euribor rates hit new record lows after ECB rate cut

FRANKFURT, July 16 (Reuters) - Euro zone bank-to-bank
lending rates hit new all-time lows on Monday, pulled down by
record low ECB interest rates and its move to stop paying banks
interest on their overnight deposits.
    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 ECB. 
    The central bank hopes its unprecedented move, which means
banks will 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 has had an
immediate impact on bank-to-bank rates.  
    Three-month Euribor rates, traditionally the
main gauge of bank-to-bank lending, hit a new all-time low of
0.477 percent on Monday, down from 0.486 percent.
    Other key rates saw similar drops. Six-month Euribor rates
 fell to 0.760 percent from 0.767 percent.
    Shorter-term one week rates decreased to 0.122
percent from 0.127 percent, below overnight rates which
dipped to 0.117 percent, down from 0.128 percent.
    Euribor rates, like counterpart Libor bank-to-bank rates
, are at the centre of a manipulation scandal after it
emerged a number of banks were falsely submitting the rates they
pay to the committee that aggregates the data. 
    Dollar-priced three-month bank-to-bank Euribor lending rates
  fixed lower at 0.939 percent, while
overnight dollar rates fixed at 0.338 percent. 
    Banks have also begun to drip their excess cash back into
the ECB's now non-interest paying deposit facility.
    The move by the ECB to stop paying interest on overnight
deposits prompted a near half trillion euro transfer out of its
deposit facility into banks' current accounts when it came into
force on Wednesday.
    Banks parked 387 billion euros in the deposit facility, up
from 366 billion in the prior session. They cut their current
account levels to 496 billion euros, down from 503 billion.     
    
    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 year       

 (Reporting by Frankfurt newsroom)

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