ECB keeps interest rates unchanged
On July 8, the Governing Council of the ECB decided to keep the interest rate unchanged at one per cent on its Main Refinancing Operations (MROs). Interest rates on the marginal lending and deposit facilities were also left unchanged, at 1.75 per cent and 0.25 per cent, respectively.
On July 5, the ECB announced its weekly MRO. The auction was conducted on July 6, and attracted bids from euro area eligible counterparties of €229.07 billion, €66.16 billion more than the amount bid for in the MRO held the previous week. This larger than usual bid amount reflected the maturity of two operations, the usual weekly MRO and the maturity of a one-off, six-day Liquidity Providing Fine Tuning operation which also matured on July 7. 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 July 6 the ECB also conducted an auction for a seven-day, fixed-term deposit intended to absorb €59 billion. The operation was designed to sterilise the effect of purchases made under the Securities Market Programme and settled by the previous Friday, July 2. The auction was carried out at a variable rate with euro area eligible counterparties which were allowed to place up to two bids at a maximum rate of one per cent. It attracted bids amounting to €87.43 billion. The ECB allotted the full intended volume of €59 billion, or 67.48 per cent of the total amount bid for. The marginal rate on the auction was set at 0.75 per cent, with the weighted average rate standing at 0.56 per cent.
On July 7, the ECB conducted a seven-day US dollar funding operation through collateralised lending in conjunction with the US Federal Reserve. The rate for the operation was fixed at 1.19 per cent, but it did not attract any bids.
Meanwhile, in the domestic primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on October 8 and for 182-day bills maturing on January 7, 2011. Bids of €74.78 million were submitted for the 91-day bills, with the Treasury accepting €17.78 million, while bids of €64.6 million were submitted for the 182-day bills, with the Treasury accepting €24.6 million.
Since €22.15 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by €20.23 million to stand at €566.47 million.
The yield from the 91-day bill auction was 0.735 per cent, i.e. 2.7 basis points higher than on bills with a similar tenor issued on July 2. The yield on these bills represented a bid price of 99.8146 per 100 nominal. The yield from the 182-day bill auction was 0.819 per cent, i.e. 6.9 basis points higher than that on bills with a similar tenor issued on June 25. The yield on these bills represented a bid price of 99.5877 per 100 nominal.
During the week, Treasury bill trading on the Malta Stock Exchange amounted to €3.49 million, with all trading conducted by the Central Bank of Malta in its role as market maker.
Concurrently, off-exchange transactions, amounted to €0.07 million, also all transacted by the Central Bank of Malta.
Today the Treasury will invite tenders for 182-day bills maturing on January 14, 2011, and 273-day bills maturing on April 15, 2011.