January 29, 2013 / 10:28 AM / 5 years ago

Euribor rates edge up ahead of early LTRO repayment

FRANKFURT, Jan 29 (Reuters) - Euribor bank-to-bank lending
rates rose on Tuesday after banks decided to repay billions of
euros in crisis loans to the European Central Bank in a move
that will suck money out of the financial system.
    The ECB said on Friday that 278 banks would return early a
total 137.2 billion euros ($183 billion) of the three-year loans
they took in December 2011. The banks will repay the money on
Wednesday, using the earliest repayment opportunity.
    A Reuters poll had forecast a return of 100 billion euros.
    The larger-than-expected early repayment is a sign that at
least parts of the financial system are returning to health.
    Banks can, however, stock up on shorter-term ECB loans. Also
on Tuesday, banks took 124.1 billion euros in the usual weekly
opportunity fpr seven-day ECB funding and on Wednesday there is
a monthly offering of three-month loans.
    A major take-up in the tenders would reduce the impact of
the 3-year loan payback and send market rates back down.
  Banks took more than 1 trillion euros of ultra-cheap,
three-year loans, or Long-Term Refinancing Operations, from the
ECB in two separate offers roughly a year ago. The ECB used
these LTROs to try to restore order to Europe's crisis-hit
financial system.
    Banks can repay the money early on a voluntary basis weekly
from now on and while the heavy oversupply of ECB cash has long
depressed the rates banks charge each other on lending markets,
a significant repayment could drive rates higher.
    Reuters calculations show there is around 583 billion euros
of excess liquidity sitting in euro zone banks.
    On Tuesday, three-month Euribor rates,
traditionally the main gauge of unsecured bank-to-bank lending,
rose to 0.226 percent from 0.224 percent.
    The six-month rate increased to 0.373 percent from 0.370
percent while the one-week rate edged up to 0.083
percent from 0.082 percent. The overnight Eonia rate 
rose to 0.073 percent from 0.071 percent.
    Dollar-priced bank-to-bank Euribor lending rates
  were mixed, with three-month rates
falling to 0.48273 percent from 0.48455 percent and one-week
rates rising 0.33182 percent from 0.32909 percent.
    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 
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 (Reporting by Frankfurt newsroom)

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