Details of refinancing operations for 2011’s first quarter announced

On Thursday, December 2, the Governing Council of the European Central Bank (ECB) announced that it would continue conducting its main refinancing operations (MROs) as fixed rate tender procedures with full allotment for as long as necessary, and at least until the end of the third maintenance period of 2011 on April 12, 2011. This procedure will also remain in use for the Eurosystem’s special-term refinancing operations with a maturity of one maintenance period, which will continue to be conducted for as long as needed, and at least until the end of the first quarter of 2011. The fixed rate in these special-term refinancing operations will be the same as the MRO rate prevailing at the time.

Furthermore, the Governing Council decided to conduct the three-month longer-term refinancing operations (LTROs) to be allotted on January 26, February 23 and March 30, 2011 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.

On the same day, the ECB Governing Council decided to keep the interest rate on its MROs unchanged at 1.00 per cent. Interest rates on the marginal lending facility and the deposit facility were also left unchanged, at 1.75 per cent and 0.25 per cent, respectively.

On Monday, November 29, the ECB announced its weekly MRO. The auction was conducted on Tuesday, November 30, and attracted bids from euro area eligible counterparties of €179.69 billion, €2.59 billion higher 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 Tuesday, November 30, the ECB also conducted an auction for a seven-day fixed-term deposit intended to absorb €67 billion. The operation was designed to sterilise the effect of purchases made under the Securities Market Programme and settled by the previous Friday, November 26. 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 €77.70 billion, with the ECB allotting the full intended volume of €67 billion, or 86.23 per cent of the total bid amount. The marginal rate on the auction was set at 0.48 per cent, with the weighted average rate at 0.41 per cent.

On Wednesday, December 1, the ECB conducted a seven-day US dollar funding operation through collateralised lending in conjunction with the US Federal Reserve. This attracted bids of $0.06 billion, which was allotted in full at a fixed rate of 1.21 per cent.

In the domestic primary market for Treasury Bills, the Treasury invited tenders for 91-day bills maturing on March 4, 2011, and for 182-day bills maturing on June 3, 2011. Bids of €76.70 million were submitted for the 91-day bills, but none were accepted by the Treasury. Bids of €76.95 million were submitted for the 182-day bills, with the Treasury only accepting €3.03 million. Since €7.25 million worth of bills matured during the week, the outstanding balance of Treasury Bills decreased by €4.22 million, to stand at €411.26 million.

The yield from the 182-day bill auction was 1.122 per cent, i.e. 7.2 basis points lower than on bills with a similar tenor issued on November 5, 2010, representing a bid price of 99.4360 per 100 nominal.

Treasury Bill trading on the Malta Stock Exchange amounted to €1.95 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 March 11, 2011.