ECB continues to inject euro, US dollar and Swiss franc liquidity

On Monday, January 5, the ECB conducted its weekly Main Refinancing Operation (MRO). This attracted bids for €216.12 billion from euro area eligible counterparties, at a fixed rate equivalent to the main refinancing rate of 2.50 per cent.

On the same day, the Eurosystem and the Swiss National Bank 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 €17.69 billion, at a fixed price of -6.08 swap points.

On Tuesday, January 6, the ECB announced two supplementary Longer-Term Refinancing Operations (LTROs), one with a maturity of 98 days and the other with a maturity of 182 days. In the case of the former the ECB received bids for €9.45 billion, while in the 182-day LTRO it received bids for €7.56 billion. Both LTROs were conducted at a fixed rate equivalent to the ECB's main refinancing rate of 2.50 per cent.

On Wednesday, January 7, the ECB, in conjunction with the US Federal Reserve, conducted a seven-day US dollar funding operation through collateralised lending. This attracted bids for $41.10 billion, at a fixed rate of 1.15 per cent. In parallel with this operation, the Eurosystem also offered seven-day dollar liquidity through a EUR/USD foreign exchange swap operation. This attracted bids for $3.32 billion at a fixed price of -1.84 swap points.

The amounts bid for in euro and USD operations were allotted in full in accordance with the ECB's press releases dated 15 October and 18 December 2008, respectively.

In the domestic primary market for Treasury bills, the Treasury invited tenders for 90-day bills maturing on April 9.

Bids for €29.92 million were submitted, with the Treasury accepting all bids. Since €22.86 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by €7.07 million to €386.37 million.

The yield resulting from the auction was 2.659 per cent, 99.1 basis points lower than that on bills with a similar tenor issued on December 5, 2008.

This substantial decrease in the 90-day Treasury bill yield reflected the impact of the 75-basis point cut in the ECB's minimum bid rate effective from December 10, 2008.

The latest yield represented a bid price of 99.3396 per 100 nominal.

Today the Treasury will invite tenders for 91-day bills maturing on April 17.

Treasury bill trading on the Malta Stock Exchange amounted to €7.11 million during the week, with all trades being conducted by the Central Bank of Malta in its role as market maker.

Turnover off-exchange amounted to €677,000, with the bulk, €600,000, being affected by other brokers.