The Monetary Policy Committee (MPC) has retained the policy benchmark Central Bank Rate (MPC) at 18 per cent for the third time in a row, noting that there were threats on the Kenya Shilling and domestic prices. The MPC said it needed to ensure that inflation continues to decline towards the Government target of nine per cent for the financial year ending June 30. Euro-priced bank-to-bank
lending rates fell below the European Central Bank's benchmark
lending rate of 1-percent on Monday in anticipation of another
huge wave of ultra-cheap liquidity from the ECB's next dose of
3-year funding this week.
After the ECB injected 489 billion euros in its first
installment of 3-year loans in December, economists polled by
Reuters are expecting Wednesday's second tranche to gush another
half a trillion euros into the banking system. Three-month Euribor rates, traditionally the main gauge of unsecured interbank euro lending and a mix of interest rate expectations and banks' appetite for lending, fell to 0.997 percent from 1.006 percent on Friday, hitting the lowest level since January last year. Rates in other maturities also dropped. Six-month rates fell to 1.292 percent from 1.301 percent, while 1onger-term 12-month rates dropped to 1.627 percent from 1.636 percent.
Short-term rates, the most heavily influenced by excess liquidity which currently stands at a massive 467 billion euros according to Reuters calculations, bucked the trend. One week rates remained unchanged at 0.361 percent, while overnight rates rose to 0.368 percent
from 0.364 percent.
Although they remain well above the low of 0.634 percent they hit in early 2010, 3-month lending rates have dropped by roughly a third since the ECB announced plans to lend banks three-year money back in December. The market doesn't believe rates will drop as far as in 2010. Euribor futures showed markets were anticipating rates to fall to 0.89 percent by next month, with an additional drop to 0.76 percent by the end of the year.
In anticipation of this week's tender of 3-year cash, banks have more than halved their intake of 1-month loans and instead increased their use of weekly ECB funds, money they will be easily able to drop again once they have digested the 3-year
cash.
Thanks to the first 489 billion euro cash-injection in
December, the euro zone managed to avoid a credit crunch as bank
lending to companies stabilised in January, ECB data showed on
Monday.
The cash is also having a positive impact on both the money
market and euro zone bond markets, such as Spain and Italy.
Money market experts also report that some banks are now
prepared to lend to some of their peers for as long as three
months, a marked improvement on last month when even month-long
loans were hard to come by in the open market. Despite the apparent success of the measure, the ECB wants
its second 3-year tender to be the last as central bank sources
say they are worried banks will become too reliant on the funds.
Unlike in normal times, the enormous amounts of excess cash
in the money market is keeping short-term market rates well
below the ECB's main 1 percent policy rate. The bank's
0.25-percent overnight deposit rate is acting as a floor for
market rates. Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 1000 GMT.
lending rates fell below the European Central Bank's benchmark
lending rate of 1-percent on Monday in anticipation of another
huge wave of ultra-cheap liquidity from the ECB's next dose of
3-year funding this week.
After the ECB injected 489 billion euros in its first
installment of 3-year loans in December, economists polled by
Reuters are expecting Wednesday's second tranche to gush another
half a trillion euros into the banking system. Three-month Euribor rates, traditionally the main gauge of unsecured interbank euro lending and a mix of interest rate expectations and banks' appetite for lending, fell to 0.997 percent from 1.006 percent on Friday, hitting the lowest level since January last year. Rates in other maturities also dropped. Six-month rates fell to 1.292 percent from 1.301 percent, while 1onger-term 12-month rates dropped to 1.627 percent from 1.636 percent.
Short-term rates, the most heavily influenced by excess liquidity which currently stands at a massive 467 billion euros according to Reuters calculations, bucked the trend. One week rates remained unchanged at 0.361 percent, while overnight rates rose to 0.368 percent
from 0.364 percent.
Although they remain well above the low of 0.634 percent they hit in early 2010, 3-month lending rates have dropped by roughly a third since the ECB announced plans to lend banks three-year money back in December. The market doesn't believe rates will drop as far as in 2010. Euribor futures showed markets were anticipating rates to fall to 0.89 percent by next month, with an additional drop to 0.76 percent by the end of the year.
In anticipation of this week's tender of 3-year cash, banks have more than halved their intake of 1-month loans and instead increased their use of weekly ECB funds, money they will be easily able to drop again once they have digested the 3-year
cash.
Thanks to the first 489 billion euro cash-injection in
December, the euro zone managed to avoid a credit crunch as bank
lending to companies stabilised in January, ECB data showed on
Monday.
The cash is also having a positive impact on both the money
market and euro zone bond markets, such as Spain and Italy.
Money market experts also report that some banks are now
prepared to lend to some of their peers for as long as three
months, a marked improvement on last month when even month-long
loans were hard to come by in the open market. Despite the apparent success of the measure, the ECB wants
its second 3-year tender to be the last as central bank sources
say they are worried banks will become too reliant on the funds.
Unlike in normal times, the enormous amounts of excess cash
in the money market is keeping short-term market rates well
below the ECB's main 1 percent policy rate. The bank's
0.25-percent overnight deposit rate is acting as a floor for
market rates. Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 1000 GMT.
0 comments:
Post a Comment