LONDON (MarketWatch) - The European Central Bank loaned 442 billion euros ($620 billion) at a fixed interest rate of 1% Wednesday in an effort to jumpstart lending in the 16-nation euro zone.

The event marked the first-ever one-year tender. And it was also the largest amount ever allotted in a single auction by the Frankfurt-based ECB.

Economists said the massive participation wasn't a surprise given the extremely low interest rate.

"In part, this was very much on the cards: if banks expect that interest rates are now likely to have troughed in the euro zone -- as suggested by market expectations -- this operation possibly represents the final opportunity to obtain 12-month funding at just 1%," said Daniele Antonucci, European economist at Capital Economics.

As expected, the auction put further downward pressure on money market rates. The euro interbank overnight rate, or euribor, for 12-month interbank loans fell to a record low of 1.57%, news reports said.

Kenneth Broux, an economist at Lloyds TSB, said market participants had braced for an even larger participation. A total of less than 500 billion euros may signal to some market participants that the need for funding isn't quite as intense as some had believed, providing some support for the euro, he said.

The euro traded above $1.41 versus the dollar following the announcement but recently trimmed gains to trade near unchanged at $1.4071.

Antonucci, meanwhile, said it's not clear that the tender will end up providing a lending boost.

Despite the ECB's pledge to provide unlimited liquidity to banks in the region, its total lending to banks had been easing, likely as a result of their reluctance to lend to the wider economy, he said, in a research note. Meanwhile, demand for shorter-term ECB loans may slip as a result of the one-year tender.

"In all, then, while the ECB's liquidity support to euro zone banks sounds the right thing to do, as bank lending is by far the most important source of financing for euro-zone non-financial firms, there is no guarantee that euro-zone banks will use this extra liquidity to lend to the broader economy," Antonucci said.

ECB loans 442 billion euros for 1 year