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Why Euribor Could Trade Below the ECB Deposit Facility Rate

Article Quant Q&A · Author: Tryrshaugh
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Summary

This document raises a question about the relationship between three-month Euribor and the ECB deposit facility rate. It observes that unsecured term borrowing rates had remained below the rate banks could receive on central-bank overnight deposits, and asks why banks would accept the lower market yield. It also wonders whether access to the deposit facility is limited by a quota.

The text provides no explanation or answer, and it does not analyze rate data beyond citing the observed relationship. It therefore serves as a prompt to investigate euro money-market pricing rather than a complete account of it. A useful analysis would need to distinguish the terms, access conditions, counterparties, and balance-sheet costs associated with the two placements, as well as consider market conditions at the time. The question alone does not establish that banks could freely move funds between them or that the quoted rates were directly comparable in practice.

Key ideas

  • The document asks why three-month Euribor could be below the ECB deposit facility rate.
  • It contrasts unsecured term deposits with overnight deposits at the central bank.
  • It proposes facility access limits as a possible explanation, but provides no evidence for that idea.
  • The rate relationship is stated as an observation, without a market mechanism or conclusion.

Tags

Fixed incomeStatistics
Full text
# Why are/were Euribor rates consistently lower than ECB deposit facility rates since 2020?


# Why are/were Euribor rates consistently lower than ECB deposit facility rates since 2020?












Why are unsecured term deposits in EUR yielding lower than a simple overnight deposit at the ECB ? Isn't it supposed to be the opposite ?

The 3 month Euribor just broke -0,50% a few days ago, why was it so low for so long ?

Source : https://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=143.FM.M.U2.EUR.RT.MM.EURIBOR3MD_.HSTA

I assume there must a quota on the ECB deposit facility ? What stops eurozone banks from using the deposit facility to a greater extent if that isn't the case ?

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.