Key Points
Excess liquidity is at a two-month high of more than 4.1 trillion ($4.5 trillion), up almost 3% since the start of the month, ECB data show...
Lenders borrowing costs are trailing the European Central Banks benchmark by the most on record, highlighting the challenge officials face to tighten monetary conditions after years of loose policy left markets awash with trillions of euros of liquidity..
The euro short-term rate, or ESTR, is currently 10.5 basis points below the central banks deposit rate, which is at its highest in 15 years..
Thats due in part to the central banks move to discourage national governments from keeping funds parked on its deposits, as well as years of ultra-low funding costs...
Piet Christiansen, chief strategist at Danske Bank A/S, sees the gap between the bank rate and the benchmark narrowing later this year as lenders tap the spare cash sloshing around the economy to repay ultra-cheap loans, and as the ECB continues to tie up its bond buying program..
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