December 31, 2013 / 10:31 AM / 4 years ago

Key Euribor rate down, banks boost liquidity buffers at year-end

FRANKFURT, Dec 31 (Reuters) - The key euro-priced
bank-to-bank lending rate eased further on Tuesday as banks
loaded up on cash to ward off year-end market tension.
    Banks took 168.662 billion euros from the European Central
Bank at its extended weekly refinancing operation on Monday,
more than the 140 billion euros money market traders had
forecast in a Reuters poll. 
    They also returned less than the full value of the ECB's
former government bond purchase programme in the weekly
sterilisation round on Monday. 
    "Banks want to window-dress their balance sheet at the end
of each year, by showing higher liquidity buffers," Francesco
Papadia, a former director general for market operations at the
ECB, wrote in a blog earlier this month. 
    The ECB has made efforts to avoid any liquidity squeeze
towards the end of the year and earlier this month it suspended
repayments of the ultra-cheap loan until Jan. 15.
    Excess liquidity - the amount of money in the market beyond
what banks need for their day-to-day operations - rose to 275
billion euros on Tuesday from around 200 billion euros the
previous day. 
    It was at over 600 billion euros at the start of this year. 
    Concerns about the drop have supported Euribor rates since
mid-November, though a spike in excess liquidity to just above
200 billion euros immediately prior to Christmas and towards the
end of the year eased the upward pressure.
    On Tuesday, the three-month Euribor rate,
traditionally the main gauge of unsecured bank-to-bank lending,
inched lower to 0.287 percent from 0.288 percent.
    The six-month Euribor rate stayed at 0.389
percent, and the shorter-term one-week rate 
dropped to 0.188 percent from 0.198 percent. Overnight Eonia
 rose to 0.223 percent from  0.192 percent on Monday.
    
    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
Graph'  
    1 week       
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    1 month      
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    3 month      
    6 month      
    9 month      
    1 year       

($1 = 0.7296 euros)

 (Reporting by Frankfurt newsroom; Editing by John Stonestreet)

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