Definition of Euribor
Euribor is the short form for Euro Interbank Offered Rate, which is the daily reference rate at which the panel of European banks borrows and offers to lend unsecured funds to each other. Euribor is published daily at 11 am Central European Time by the European Money Market institution.
Europe Interbank Offered Rate is the benchmark rate at which around 20-panel banks land or borrow from each other. This panel of banks provides daily quotes on these rates rounded to three decimal figures. The lending or borrowing can vary from one week to 12 months. Hence Euribor rates also vary from one week to 12 months period. Euribor is often structured to maintain banks’ liquidity and provide them excess cash stability at the time of need.
Euribor Technical Features
- Each panel bank provides its rate data by 10.45 am CET each day on its private page. This private page can only be viewed by the particular panel bank and the Thomson Reuters staff responsible for creating the quotes. The Panel banks can correct and update the rate from 10.45 am to 11 am.
- At 11.00 am, Thomson Reuters will calculate and process the Euribor rates. For the calculation process, Thomson Reuters remove the top and bottom 15% rates and then take the average rates upto three decimal places and update them.
- At 11.00 am, after the calculation, Thomson Reuters publishes the calculated Euribor rate, which is made available to data vendors and subscribers.
- If any panel bank fails to provide the data by 11 am, then Thomson Reuters will calculate and update the rate without the missing data. If more than 50% of the panel banks fail to provide the data, then Thomson Reuters delays publishing the data till 11.15 am CET.
Example of Euribor
XYZ bank issues floating rates bonds linked to the Euribor rates. Assume it issues bonds at Euribor rate plus 100 bps points. That means if current Euribor rates are 2%, XYZ bond’s rates are at 3%. If, after six months, Euribor rates change to 3%, XYZ bank’s bond rate will be 4%.
Current Euribor Interest Rates
Below are the updated Euribor rates for different maturities:
|EuriBor 1 week||-0.560%||-0.568%||-0.571%||-0.564%||-0.570%|
|Euribor 1 month||-0.557%||-0.561%||-0.559%||-0.561%||-0.567%|
|Euribor 3 months||-0.540%||-0.543%||-0.543%||-0.548%||-0.553%|
|Euribor 6 months||-0.525%||-0.527%||-0.532%||-0.528%||-0.533%|
|Euribor 12 months||-0.498%||-0.505%||-0.506%||-0.502%||-0.503%|
Charts of Euribor
Below is the Euribor chart for one month since its inception; we can see that the highest Euribor rates were around 5% in 2009. Currently, the Euribor rates are at the lowest at -0.5%.
Chart: Euribor1-month rate
Why is Euribor Negative?
The central bank introduced negative interest rates at the time of the year 2014. This boosted the economy by forcing the banks to lend more money to the market. With negative interest rates, banks effectively gave money to the central bank for depositing money which doesn’t make sense. Hence the idea was to reduce the deposit in the central bank and provide more loans to people and businesses. But it has adverse effects also, such as more NPA pressure for banks and low liquidation.
Below should be the Euribor forecast, which should also be negative for the coming months.
It is an important benchmark and yardstick for the banks to lend and borrow money to each other and the eurozone market. The new trend is the negative Euribor rate, which is a ripple effect on the economy.
This is a guide to Euribor. Here we also discuss the definition and why euribor is negative, along with features and examples. You may also have a look at the following articles to learn more –
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