Money market report - week ended October 31
ECB conducts an LTRO at 3.75 per cent
On Monday, October 27, the ECB announced its weekly Main Refinancing Operation (MRO). This attracted bids for €325.11 billion from euro area eligible counterparties, which amount was 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 a EUR/CHF foreign exchange swap, with a seven-day maturity, to provide Swiss franc liquidity against the euro. This operation attracted bids for €13.65 billion, which amount was again fully allotted at a fixed price of -6.04 swap points.
The following day, the ECB announced a standard Longer-Term Refinancing Operation (LTRO) with a maturity of three months. In this LTRO, the ECB received bids for €103.11 billion, which amount was fully allotted. But whereas in previous auctions the LTRO rate was determined on the basis of competitive bidding (American auction), this week's LTRO was conducted at a fixed rate equivalent to the ECB's main refinancing rate of 3.75 per cent. This change was intended to align money market rates more closely to the ECB's policy rate.
The day after, the ECB, in conjunction with the US Federal Reserve, conducted a seven-day US dollar funding operation through collateralised lending. This attracted bids for $92.14 billion, which amount was fully allotted at a fixed rate of 1.91 per cent. In parallel with this operation, the Eurosystem also offered seven-day dollar liquidity through a EUR/USD foreign exchange swap operation which attracted bids for $14.51 billion, which amount was fully allotted at a fixed price of 2009 - 3.03 swap points.
In the domestic primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on January 30. Bids for €39.39 million were submitted, with the Treasury accepting €27.34 million. Since €23.99 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by €3.35 million to €381.19 million.
The yield resulting from the auction was 4.255 per cent, 1.3 basis points lower than that on bills with a similar tenor issued on October 24. The latest yield represented a bid price of 98.9359 per 100 nominal.
Today the Treasury will invite tenders for 91-day bills maturing on February 6, 2009.
Treasury bill trading on the Malta Stock Exchange amounted to €3.275 million during the week, with all trades being conducted by the Central Bank of Malta in its role as market maker.