ECB conducts liquidity providing six-day fine-tuning operation

On Monday, June 28, the ECB announced its weekly MRO. The auction conducted last Tuesday attracted bids from euro-area eligible counterparties of €162.91 billion, €11.4 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 current ECB policy.

On Tuesday, June 29, the ECB also conducted an auction for a seven-day, fixed-term deposit intended to absorb €55 billion. The operation was designed to sterilise the effect of purchases made under the Securities Market Programme and settled by the previous Friday, June 25. The auction was again carried out at a variable rate, with euro area eligible counterparties allowed to place up to two bids at a maximum rate of one per cent. The operation attracted bids amounting to €31.87 billion with the ECB allotting the total amount bid for. The marginal rate on the auction was set at one per cent, with the weighted average rate resulting at 0.54 per cent.

On Wednesday, June 30, the ECB conducted a standard Longer-Term Refinancing Operation (LTRO) with a maturity of 91 days. The operation attracted bids for €131.93 billion, €119.77 billion more than the value bid for in the previous LTRO with a similar tenor. 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 current ECB policy.

On the same day, in conjunction with the US Federal Reserve, the ECB conducted a seven-day US dollar funding operation through collateralised lending. The rate for the operation was fixed at 1.20 per cent, but it did not attract any bids.

On Thursday, July 1, in line with the news release dated March 4, 2010, the ECB carried out a liquidity providing six-day fine-tuning operation in the form of a fixed rate tender with full allotment. The operation was designed to smoothe out liquidity effects of the first one-year LTRO which matured on July 1, 2010. The auction attracted bids for €111.24 billion, which amount was allotted in full at the prevailing main refinancing rate of one per cent.

Meanwhile, in the domestic primary market for Treasury Bills, the Treasury invited tenders for 91-day bills maturing on October 1, 2010, and for 273-day bills maturing on April 1, 2011. Bids of €60 million were submitted for the 91-day bills, with the Treasury accepting €11 million, while bids of €53.6 million were submitted for the 273-day bills, with the Treasury accepting €22.95 million. Since €40.32 million worth of bills matured during the week, the outstanding balance of Treasury Bills decreased by €6.37 million to stand at €546.24 million.

The yield from the 91-day bill auction was 0.708 per cent, i.e. 3.3 basis points higher than on bills with a similar tenor issued on June 18, 2010. The yield on these bills represented a bid price of 99.8214 per 100 nominal. The yield from the 273-day bill auction was 0.918 per cent, i.e. 3.5 basis points higher than that on bills with a similar tenor issued on June 25, 2010. The yield on these bills represented a bid price of 99.3087 per 100 nominal.

During the week treasury bill trading on the Malta Stock Exchange amounted to €1.29 million, with all trading conducted by the Central Bank of Malta in its role as market maker.

Today the Treasury will invite tenders for 91-day bills maturing on October 8, 2010, and 182-day bills maturing on January 7, 2011.