ECB announces details of refinancing operations

On September 2, the ECB Governing Council announced its decision to conduct its MROs as fixed rate tender procedures with full allotment for as long as necessary, at least until the end of this year’s 12th maintenance period on January 18, 2011. This procedure will also remain in use for the special-term refinancing operations with a maturity of one maintenance period, which will be conducted for as long as required, at least until the end of 2010. The fixed rate in these operations will be the same as the MRO rate prevailing at the time.

Furthermore, the council also decided to conduct the three-month longer-term refinancing operations (LTROs) to be settled on October 28, November 25 and December 23 as fixed rate tender procedures with full allotment. The rates in these three-month operations will be fixed at the average rate of the MROs over the life of the respective LTRO. The Governing Council further decided to carry out three additional fine-tuning operations when the remaining six-month and 12-month refinancing operations mature: one six-day operation with announcement, allotment and settlement on September 30, one six-day operation with announcement, allotment and settlement on November 11 and one 13-day operation with announcement, allotment and settlement on December 23. The fixed rate tender procedure with full allotment will also be used, with the rate being the same as the MRO rate prevailing at that time.

On the same day, the ECB Governing Council also decided to keep the interest rate unchanged at one per cent on its MROs. Interest rates on the marginal lending and deposit facilities also remained unchanged, at 1.75 per cent and 0.25 per cent, respectively.

On August 30, the ECB announced its weekly MRO. The auction was conducted on August 31, and attracted bids from euro area eligible counterparties of €153.06 billion, €2.74 billion more than the amount bid for 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 August 30, the ECB conducted an auction for a seven-day, fixed-term deposit intended to absorb €61 billion to sterilise the effect of purchases made under the Securities Market Programme and settled by August 27. 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. The operation attracted bids amounting to €117.39 billion. The ECB allotted the full intended volume of €61 billion, or 51.96 per cent of the total amount bid for. The marginal rate on the auction was set at 0.35 per cent, with the weighted average rate standing at 0.33 per cent.

On September 1, the ECB conducted a seven-day US dollar funding operation through collateralised lending in conjunction with the US Federal Reserve. This attracted bids for $0.06 billion, which was allotted in full at a fixed rate of 1.19 per cent.

Meanwhile, in the domestic primary market for Treasury Bills, the Treasury invited tenders for 28-day bills maturing on October 1 and for 91-day bills maturing on December 3. Bids amounting to €65.5 million were submitted for the 28-day bills, with the Treasury accepting €3.5 million, while bids for €70.52 million were submitted for the 91-day bills, with the Treasury accepting €2.75 million. Since no bills matured during the week, the outstanding balance of Treasury Bills increased by €6.25 million, to stand at €521.83 million.

The yield from the 28-day bill auction was 0.755 per cent, i.e. 64.5 basis points lower than that on bills with a similar tenor issued on May 29, 2009. The yield on these bills represented a bid price of 99.9413 per 100 nominal. The yield from the 91-day bill auction was 0.699 per cent, i.e. 5.1 basis points lower than that on bills with a similar tenor issued on August 27. The yield on these bills represented a bid price of 99.8236 per 100 nominal.

Treasury bill trading on the Malta Stock Exchange amounted to €4.08 million during the week, with all trades being 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 December 10.