Euribor®, charts allow some interesting remarks. Here you find the historical chart (starting in 1999, when Euribor was introduced) of some of the main Euribor rates, with also the European Central Bank official rate as a reference.
- Euribor historical chart (january 1999 – september 2009)
As you can clearly see, the stress period seem to be behind us, leaving space to a normalization of financial interbank markets.
Actually, there are some peculiarity in these week’s trend. By now, Euribor rates are below ECB rate, while usually they are over it.
This becomes evident if we look at the Euribor rate – ECB rate spread chart (below you can find two charts, one with 1, 3 and 12 months Euribor rates, and one less crowded, with considers only 1 month Euribor)
- Euribor (1/3/12 months) rate – ECB rate spread
- Euribor (1 month) rate – ECB rate spread
Simplifying, in an hypothetical condition where (ECB) rates do not change, and there is no strong stress (or other abnormal condition) in the market, Euribor rate sholud be slightly higher than ECB rate, since an interbank transaction implies a slightly higher risk than a transaction in which the counterpart is a Central Bank.
Deviances from this scenario means one or more of the following:
- operators expect a variation of ECB rates (hence they “anticipate” it)
- there is a variation of reciprocal trust (i.e. variation of perceived risk)
- there is a variation of offer and demand of interbank loans.
We can count out an expectation of a cut in ECB rates, since very few analysts expect them to go under present 1.00%, but we also have to keep in mind that ECB policies, in the last few months, aimed to support and “fluidificate” interbank market (and Euribor rates are therefore affected). But it is also possible that now we have a reduction of demand: since all banks, in many ways, are much stricter in granting loans to their customers, it would make sense if they also need less money from the interbank market, thus lowering the demand.
It is also worth noticing the wider spread between longer term Euribor (12 months) and shorter ones (1 week / 1 month)_
- Euribor (1 month) – Euribor (12 months) spread
Euribor (1 week) – Euribor (12 months) spread
In the last few months, this spread grow significantly wider. This can be explained in two ways:
- Banks expect a rise in official ECB rates within the next 12 months
- Longer Euribor rates may incorporate the implicit cost of a much higher risk for longer term operations.
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Interessanti spunti di riflessione dai grafici storici Euribor aggiornati
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