Tuesday June 30, 2009
LONDON: Bank-to-bank lending rates for euro funds extended their decline on Monday and are set to remain low as the market is awash with liquidity following the European Central Bank's massive injection of one-year funds last week.
Highlighting the abundance of liquidity, commercial banks deposited 236.2 billion euros at the ECB's overnight vault - the most since January 19 - latest data showed, and well above the 7.4 billion euros banks had deposited before taking delivery of last week's record cash injection.
"What the deposit spike means is that banks are filling up with liquidity now. It's not a fear factor so much as excess liquidity," said David Keeble, global head of interest rate strategy at Calyon in London. The three-month London interbank offered rate was fixed at 1.10625 percent - the lowest on record. The equivalent dollar and sterling rates also hit fresh lows.
This followed a drop in the three-month Euribor rate, traditionally the main gauge of interbank euro lending, to a fresh all-time trough of 1.108 percent. At the very short end, the Euro overnight index average, a weighted average of all overnight unsecured lending in the interbank market, was last fixed at a record low of 0.388 percent.
The one-week refinancing operation on Tuesday will be closely watched. Last week, ahead of the one-year tender, banks borrowed just 167.902 billion euros of one-week funds from the ECB, compared with 309.621 billion euros previously.
The ECB lent 1,121 banks 442 billion euros of one-year funds at a 1 percent rate last week at its first 12-month refinancing operation, aimed at spurring lending and boosting the economy. Analysts said whether the ECB will deliver any more measures to boost the economy remains to be seen.
Dollar Libor rates were also mostly down with the three-month at a record low of 0.59688 percent. In Asia, Hong Kong interbank lending rates fell after the HKMA intervened to back the territory's currency peg by injecting cash into the money markets. The overnight HIBOR was fixed at 0.05000 percent, below Friday's 0.06929 percent and the 1-month HIBOR eased to 0.10214 percent from 0.11214 percent.
(Reuters)
LONDON: Bank-to-bank lending rates for euro funds extended their decline on Monday and are set to remain low as the market is awash with liquidity following the European Central Bank's massive injection of one-year funds last week.
Highlighting the abundance of liquidity, commercial banks deposited 236.2 billion euros at the ECB's overnight vault - the most since January 19 - latest data showed, and well above the 7.4 billion euros banks had deposited before taking delivery of last week's record cash injection.
"What the deposit spike means is that banks are filling up with liquidity now. It's not a fear factor so much as excess liquidity," said David Keeble, global head of interest rate strategy at Calyon in London. The three-month London interbank offered rate was fixed at 1.10625 percent - the lowest on record. The equivalent dollar and sterling rates also hit fresh lows.
This followed a drop in the three-month Euribor rate, traditionally the main gauge of interbank euro lending, to a fresh all-time trough of 1.108 percent. At the very short end, the Euro overnight index average, a weighted average of all overnight unsecured lending in the interbank market, was last fixed at a record low of 0.388 percent.
The one-week refinancing operation on Tuesday will be closely watched. Last week, ahead of the one-year tender, banks borrowed just 167.902 billion euros of one-week funds from the ECB, compared with 309.621 billion euros previously.
The ECB lent 1,121 banks 442 billion euros of one-year funds at a 1 percent rate last week at its first 12-month refinancing operation, aimed at spurring lending and boosting the economy. Analysts said whether the ECB will deliver any more measures to boost the economy remains to be seen.
Dollar Libor rates were also mostly down with the three-month at a record low of 0.59688 percent. In Asia, Hong Kong interbank lending rates fell after the HKMA intervened to back the territory's currency peg by injecting cash into the money markets. The overnight HIBOR was fixed at 0.05000 percent, below Friday's 0.06929 percent and the 1-month HIBOR eased to 0.10214 percent from 0.11214 percent.
(Reuters)
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