ECB conducts first one-week liquidity absorbing operation

On Monday, May 17, the European Central Bank (ECB) announced its weekly Main Refinancing Operation (MRO). This auction, which was conducted last Tuesday, attracted bids for €104.75 billion from euro area eligible counterparties, €5.18 billion more than the amount bid for in the previous week. The bid amount was allotted in full at a fixed rate equivalent to the prevailing main refinancing rate of one per cent in accordance with the current ECB policy.

In accordance with the strategy outlined by the ECB on May 10, on May 18 the ECB conducted an auction for a seven-day fixed-term deposit intended to absorb €16.5 billion. This operation was intended to sterilise the effect of the amount of purchases under the Securities Market Programme that were settled on May 14. This auction was carried out at a variable rate, with counterparties allowed to place up to two bids at a maximum rate of one per cent. This operation attracted a large volume of bids, amounting to €162.74 billion, from euro area eligible counterparties. The ECB allotted the full intended volume of €16.5 billion, or 10.14 per cent of the total amount bid for. The marginal rate on this operation was set at 0.29 per cent, whilst the weighted average rate was 0.28 per cent.

On the same day, in accordance with the Governing Council decision of May 10, the ECB, in conjunction with the US Federal Reserve, conducted an 84-day US dollar funding operation through collateralised lending. This attracted bids for $1.03 billion, which amount was allotted in full at a fixed rate of 1.24 per cent.

The following day, the ECB, in conjunction with the US Federal Reserve, conducted a seven-day US dollar funding operation through collateralised lending. The rate for this operation was fixed at 1.22 per cent, but the operation did not attract any bids.

Meanwhile, in the domestic primary market for Treasury Bills, the Treasury invited tenders for 91-day bills maturing on August 20 and for 182-day bills maturing on November 19, next year. Bids for €48 million were submitted for the 91-day bills, with the Treasury accepting €9 million, while bids for €54.05 million were submitted for the 182-day bills, with the Treasury accepting €9.05 million. Since €31 million worth of bills matured during the week, the outstanding balance of Treasury Bills decreased by €12.95 million to €599.93 million.

The yield resulting from the 91-day bill auction was 0.54 per cent, 0.9 basis points lower than that on yields with a similar tenor issued on May 14. The yield on these bills represented a bid price of 99.8637 per 100 nominal. The yield resulting from the 182-day bill auction was 0.709 per cent, i.e. 2.3 basis points higher than that on bills with a similar tenor issued on May 7. The yield on these bills represented a bid price of 99.6428 per 100 nominal.

Treasury bill trading on the Malta Stock Exchange amounted to €5.05 million during the week, with all trades being conducted by the Central Bank of Malta in its role as market maker. Concurrently, the Bank also conducted off-exchange transactions amounting to €13.15 million.

Today the Treasury will invite tenders for 91-day bills maturing on August 27 and 182-day bills maturing on November 26.