Increase in Treasury bill rates
On July 12, the ECB announced its weekly MRO. The auction was conducted last Tuesday, and attracted bids from euro area eligible counterparties of €195.66 billion, €33.41 billion less than the amount bid for in the MRO held 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.
Last Tuesday, the ECB conducted a Special Term Refinancing Operation (STRO) with a maturity of 28 days. This attracted bids of €49.40 billion, with bids again being 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, the ECB also conducted an auction for a seven-day, fixed-term deposit intended to absorb €60 billion. The operation was designed to sterilise the effect of purchases made under the Securities Market Programme and settled by July 9. The auction was 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. It attracted bids amounting to €98.29 billion. The ECB allotted the full intended volume of €60 billion or 61.04 per cent of the total amount bid for. The marginal rate on the auction was set at 0.65 per cent, with the weighted average rate standing at 0.56 per cent.
On the same day, it being the end of the reserve deposit maintenance period, the ECB also conducted an overnight Fine-tuning Liquidity Absorbing Operation. This was carried out at a variable rate, with counterparties allowed to place up to two bids at a maximum of one per cent. The operation attracted bids for €201.67 billion, of which the ECB accepted €200.91 billion or 99.62 per cent of the total amount bid for. The marginal rate on this operation was set at 0.80 per cent, while the weighted average rate was 0.76 per cent.
Last Wednesday, 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 182-day bills maturing on January 14, 2011, and for 273-day bills maturing on April 15, 2011. Bids amounting to €89.5 million were submitted for the 182-day bills, with the Treasury accepting €26.05 million, while bids amounting to €66 million were submitted for the 273-day bills, with the Treasury accepting €41 million. Since €44.92 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by €22.14 million, to stand at €588.60 million.
The yield resulting from the 182-day bill auction was 0.819 per cent, equivalent to yield on bills with a similar tenor issued on July 9. The yield on these bills represented a bid price of 99.5877 per 100 nominal. The yield resulting from the 273-day bill auction was 1.009 per cent, i.e. 9.1 basis points higher than that on bills with a similar tenor issued on July 2. The yield on these bills represented a bid price of 99.2407 per 100 nominal.
During this week there was no Treasury bill trading on the Malta Stock Exchange.
Today the Treasury will invite tenders for 91-day bills maturing on October 22.