Euribor rates fall to new lows on ECB rate cut hopes

City A.M. Reporter
Bank-to-bank lending rates fell to new all-time lows today as weak economic surveys bolstered expectations the European Central Bank will cut interest rates as soon as next month to help combat the Eurozone crisis.

The fall in Euribor rates extended a fall in interbank rates that began late last year when the ECB flooded money markets with cheap longer-term loans.

Three-month Euribor rates, traditionally the main gauge of unsecured bank-to-bank lending, eased to 0.295 per cent from 0.303 per cent on Thursday.

Six-month Euribor rates also fell, to 0.564 percent from 0.572 per cent. Shorter-term one-week rates were steady at 0.092 per cent, while Eonia overnight rates edged up to 0.108 from 0.103 per cent.

Dollar-priced three-month bank-to-bank Euribor lending rates fell to 0.752 per cent from 0.755 per cent, while overnight dollar rates eased to 0.312 per cent from 0.315 per cent.

The ECB's move to stop paying interest on banks' deposits has prompted banks to make stronger use of the current account facility, which still pays 0.75 per cent interest for the required reserves.

A total of €330bn (£260bn) was parked in the ECB's deposit facility overnight. Banks' current account deposits at the ECB dipped to €528bn.