Decrease in domestic Treasury bill rate

On Monday, August 25, the European Central Bank (ECB) announced its weekly Main Refinancing Operation (MRO). This attracted bids for €226.5 billion from euro area eligible counterparties, with the ECB allotting €167 billion, or 73.7 per cent of the total amount bid for. The marginal rate, which is the rate at which the total tender allotment is exhausted, was set by the ECB at 4.39 per cent, one basis point higher than the marginal rate resulting from the MRO of the previous week.

On Tuesday, August 26, the ECB announced its end-of-month Longer-Term Refinancing Operation (LTRO). This operation, through which the ECB injects 91-day money into the euro area banking system, attracted bids for €77.2 billion from eligible counterparties, with the ECB allotting €50 billion, or 64.7 per cent of the total amount bid for.

The marginal rate, which is the rate at which the total tender allotment is exhausted, was set by the ECB at 4.60 per cent, one basis point lower than the marginal rate resulting from the previous (supplementary) LTRO, that conducted on August 13.

On Friday, August 22, the ECB also announced that, once again, in conjunction with the US Federal Reserve, it would provide dollar liquidity to the market through a 28-day Term Auction Facility (TAF). This was in order to help satisfy the exceptional need for dollar funding and to facilitate the further normalisation of conditions in the international money market. The operation attracted bids for $89.2 billion, of which $20 billion was allotted at a fixed rate of 2.38 per cent, equivalent to the marginal rate on the Federal Reserve System's tender.

In the domestic primary market for Treasury bills, the Treasury invited tenders for 182-day bills maturing on February 27, 2009. Bids for €72.33 million were submitted, with the Treasury accepting €12.72 million. Since €23.39 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by €10.66 million to €412.49 million.

The yield resulting from the auction was 5.015 per cent, 6.1 basis points lower than that on bills with a similar tenor issued on July 11. The latest yield represented a bid price of €97.5273 per 100 nominal.

Today the Treasury will invite tenders for 91-day bills maturing on December 5, and the following week it will invite tenders for 91-day bills maturing on December 12.

Treasury bill trading on the Malta Stock Exchange amounted to €1.49 million, with the bulk of the trades being conducted by the Central Bank of Malta in its role as market maker.