Short-term market interest rates in the eurozone plunged at their fastest rate for more than a decade on Tuesday after the ECB stunned investors by pumping a record €348.6bn ($502bn) worth of funds into the markets. The amount was twice as big as the ECB had indicated would have been needed in normal circumstances. The bank said some 390 private sector banks in the eurozone had requested funds, which have been offered for two weeks at 4.21%, well below the previous prevailing market rate. The emergency operation, which followed last week’s co-ordinated central bank action, prompted the two-week euro Libor to fall a record 54bp to 4.40%, while one-month and three-month rates saw their biggest falls for nearly six years. Separately, the Bank of England also sought to offset market tensions via the first of its long-term refinancing operations, auctioning £10bn in three-month funds at a minimum rate of 5.36% – 14bp below the 5.5% base rate. Three-month sterling Libor fell for a fourth successive session.
