ECB keeps interest rates unchanged

On Thursday, July 2, the Governing Council of the European Central Bank decided to keep the interest rate on its main refinancing operations unchanged at one per cent. Interest rates on the marginal lending facility and the deposit facility also remained unchanged, at 1.75 per cent and 0.25 per cent respectively.

The ECB also announced that the covered bond purchase programme, which had been announced in a press release on June 4, 2009, will commence on July 6, 2009. In this programme the Eurosystem will purchase €60 billion euro-denominated covered bonds issued in the euro area over a period of about one year.

On Monday, June 29, the ECB announced its weekly Main Refinancing Operation. This attracted bids for €105.90 billion from euro area eligible counterparties, which amount was allotted in full at a fixed rate equivalent to the main refinancing rate of one per cent in accordance with the current ECB policy.

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 euro. This operation attracted bids for €20.04 billion, which amount was allotted in full at a fixed price of -1.37 swap points.

On Tuesday, June 30, the Eurosystem, in conjunction with the US Federal Reserve, conducted a 28-day US dollar funding operation through collateralised lending. This attracted bids for $0.17 billion, which amount was allotted in full at a fixed rate of 1.22 per cent.

On Wednesday, July 1, the Eurosystem, in conjunction with the US Federal Reserve, conducted another US dollar funding operation, with a tenor of seven-days. This attracted bids for $39.35 billion, which amount was allotted in full at a fixed rate of 1.21 per cent.

In the domestic primary market for Treasury Bills, the Treasury invited tenders for 91-day Bills maturing on October 2, 2009 and 272-day Bills maturing on August 1, 2010. Bids for €11.40 million were submitted for the 91-day Bills, with the Treasury accepting €10.59 million, while bids for €6.58 million were submitted for the 272-day Bills, with the Treasury accepting €5.00 million. Since €64.66 million worth of Bills matured during the week, the outstanding balance of Treasury Bills decreased by €49.06 million to €595.20 million.

The yield resulting from the 91-day bill auction was 1.625 per cent, five basis points lower than that on bills with a similar tenor issued on 19 June 2009. The latest yield on such Bills represented a bid price of 99.5909 per 100 nominal. The yield resulting from the 272-day Bill auction was 1.748 per cent, that is, 0.8 basis points lower than that on bills with a similar tenor issued on 26 June 2009. The yield on these Bills represented a bid price of 98.6965 per 100 nominal.

Today the Treasury will invite tenders for 91-day Bills maturing on October 9, 2009.

Treasury bill trading on the Malta Stock Exchange amounted to €6.19 million during the week, with €6.01 million trades being conducted by the Central Bank of Malta in its role as market maker and €0.18 million trades being conducted by other brokers. Off-exchange transactions amounted to €0.78 million.