Money market report - week ended October 24
ECB provides liquidity in Swiss francs and US dollars through foreign exchange swaps
On Monday, October 20, the European Central Bank announced its weekly Main Refinancing Operation (MRO). This attracted bids for €305.42 billion from euro area eligible counterparties, which were totally allotted, as pre-announced, at a fixed rate equivalent to the main refinancing rate of 3.75 per cent.
On the same day, the Eurosystem and the Swiss National Bank (SNB) conducted the first EUR/CHF foreign exchange swap, with a seven-day maturity, to provide Swiss franc liquidity against the euro. In such operations counterparties are invited to submit bids in euro for the Swiss franc equivalent required. This operation attracted bids for €15.30 billion, which amount was fully allotted at a fixed price of -6.36 swap points. These points are calculated by using the rate applied to the main refinancing operations of the ECB (currently 3.75 per cent) and the SNB one-week repo rate plus 25 basis points. These swaps will be conducted on a weekly basis and will continue to take place for as long as needed, and at least until January.
The following day, the ECB, in conjunction with the US Federal Reserve, conducted a 28-day Term Auction Facility (TAF), providing dollar liquidity through collateralised lending to the market. This operation attracted bids for $101.93 billion, which amount was fully allotted at a fixed rate of 2.11 per cent, equivalent to the Marginal Rate on the Federal Reserve System's tender. In parallel with this operation, as announced by the ECB, the Eurosystem also offered dollar liquidity through a EUR/USD foreign exchange swap, which attracted bids for $22.61 billion, which amount was fully allotted at a fixed price of -8.60 swap points.
The next day, the ECB, in conjunction with the US Federal Reserve, conducted a seven-day US dollar funding operation through collateralised lending.
This attracted bids for $67.97 billion, which amount was fully allotted at a fixed rate of 2.030 per cent. Once again US dollars were at the same time also offered through a parallel EUR/USD foreign exchange swap operation which attracted bids for $3.85 billion, which amount was fully allotted at a fixed price of -2.45 swap points.
In the domestic primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on January 23. Bids for €22.99 million were submitted, with the Treasury accepting €2.62 million. Since €21.74 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by €19.13 million to €377.84 million.
The yield resulting from the auction was 4.268 per cent, 5.1 basis points lower than that on bills with a similar tenor issued on October 17. The latest yield represented a bid price of 98.9327 per 100 nominal.
Today the Treasury will invite tenders for 91-day bills maturing on January 30.
Treasury bill trading on the Malta Stock Exchange amounted to €2.51 million during the week, with all trades being conducted by the Central Bank of Malta in its role as market maker.