Continuing downward trend in MRO participation

On Monday, October 12, the European Central Bank (ECB) announced its weekly Main Refinancing Operation (MRO). This auction, which was conducted on Tuesday, attracted bids for €61.56 billion from euro area eligible counterparties, €1.06 billion less than in the previous week.

Also on Monday, October 12, 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 €4.58 billion, and since this was well below the intended amount of €25 billion, all bids were allotted in full at a fixed price of -0.85 swap points.

On Tuesday, October 13, the ECB conducted a Special Term Refinancing Operation (STRO) with a maturity of 28 days.

This attracted bids for €7.74 billion.

Also on October 13, it being the end of the reserve deposit maintenance period, the ECB conducted an overnight fine-tuning operation to absorb excess liquidity from the market. This was carried out at a variable rate, with a maximum rate of one per cent, and attracted bids for €170.13 billion, of which the ECB accepted €169.68 billion, or 99.74 per cent of the total amount bid for. The marginal rate on the operation was set at 0.80 per cent, while the average weighted rate was 0.74 per cent.

On Wednesday, October 14, the ECB, in conjunction with the US Federal Reserve, conducted a seven-day US dollar funding operation through collateralised lending. This attracted bids for $29.69 billion, which amount was allotted in full at a fixed rate of 1.14 per cent.

The amounts bid for in all the ECB's euro refinancing operations were allotted in full at a fixed rate equivalent to the prevailing refinancing rate of one per cent, in accordance with the ECB's current policy.

In the domestic primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on January 15, 2010. Bids for €73 million were submitted, with the Treasury allotting €47.85 million. Since €34.09 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by €13.77 million to €578.43 million.

The yield resulting from the auction was 1.472 per cent, i.e. 0.7 basis points less than that on bills with a similar tenor issued on October 9. The latest yield represented a bid price of 99.6293 per 100 nominal.

Today the Treasury will invite tenders for 91-day bills maturing on January 22, 2010.

Treasury bill trading on the Malta Stock Exchange was negligible.