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Million Was Parked In 3.00% Deposit Facility Tuesday

Wednesday, January 9, 2008

ECB: EUR669 Million Was Parked In 3.00% Deposit Facility Tuesday

FRANKFURT -(Dow Jones)- One or more banks parked a total of EUR669 million on the European Central Bank's overnight deposit facility Tuesday, offering a below market rate of 3.00%, the ECB said Wednesday.

The ECB's deposit rate is far below rates available on the interbank market, where overnight money traded at 4.14%-4.21% early Wednesday, well over the 4.02%-4.14% early Tuesday. Interbank rates are the rates banks use to lend to one another.

The ECB doesn't disclose the identities of depositors. The use of the deposit facility can signal that there is a mismatch between lenders and borrowers, or a lack of market trust. The amount deposited Tuesday is a touch above the EUR579 billion Monday, which wasn't unusually high.

The euro overnight index average, or EONIA, was fixed at 4.146% Tuesday, exceeding Monday's 4.1070%, and well above the ECB's key refinancing minimum bid rate of 4.00%.

Tuesday's EONIA fixing is also above the average 3.8765% fixing in December. Nevertheless, the ECB isn't expected to inject overnight funds into the market via a quick tender Wednesday. It has recently acted to drain short-term liquidity from the market, ahead of the end of the reserve maintenance period Jan. 15.

A Stuttgart-based money trader said he expects the rate to ease by the weekend, and that the ECB is only likely to add funds if the rate kicked five to ten basis points higher.

Saturday, ECB President Jean-Claude Trichet said market tensions are receding, but are still significant. Interbank rates for three-month funds have eased, but remain stubbornly high at 4.55%-4.59%.

Posted by MOHAMED SAID at 1:47 AM  

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