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Extension of US dollar liquidity-providing operations

On Tuesday, December 21, the Governing Council of the European Central Bank (ECB) announced that it had taken a decision, in coordination with the Bank of Canada, Bank of England, Bank of Japan, and Swiss National Bank, to extend the liquidity swap arrangements with the Federal Reserve up to August 1, 2011, and to continue conducting US dollar liquidity-providing operations with a maturity of seven days. These Eurosystem operations will continue to take the form of repurchase operations against eligible collateral and will be carried out as fixed rate tenders with full allotment. However, the US dollar liquidity-providing operation carried out on December 22, with settlement on December 23, was exceptionally conducted as a 14-day operation to cover the year-end.

On Monday, December 20, the ECB announced its weekly Main Refinancing Operation (MRO). The auction was conducted on Tuesday, December 21, and attracted bids from euro area eligible counterparties of €193.47 billion, €5.66 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.

Also on Tuesday, the ECB also conducted an auction for a seven-day fixed-term deposit intended to absorb €72.50 billion. The operation was designed to sterilise the effect of purchases made under the Securities Market Programme and settled by the previous Friday, December 17. 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 of €81.02 billion, with the ECB allotting the full intended volume of €72.50 billion, or 89.48 per cent of the total amount bid for. The marginal rate on the auction was set at 0.60 per cent, with the weighted average rate standing at 0.42 per cent.

On Tuesday, following a press release issued by the Governing Council on September 2, 2010, the ECB announced a 98-day Longer-Term Refinancing Operation (LTRO) to be settled as a fixed rate tender procedure with full allotment, with the rate being fixed at the average minimum bid rate of the MROs over the life of the operation. The auction attracted bids of €149.47 billion from euro area eligible counterparties, which amount was allotted in full.

On Wednesday, December 22, the ECB conducted a 14-day US dollar funding operation through collateralised lending in conjunction with the US Federal Reserve. This attracted bids of $0.08 billion, which was allotted in full at a fixed rate of 1.17 per cent.

On Thursday, December 23, in line with the press release dated September 2, the ECB carried out a liquidity providing a 13-day fine-tuning operation as a fixed rate tender with full allotment. The operation was designed to smooth out the liquidity effects of the 12-month LTRO which matured on December 23. The auction attracted bids of €20.62 billion, which were allotted in full at the prevailing main refinancing rate of one per cent.

In the domestic primary market for Treasury Bills, the Treasury invited tenders for 91-day bills maturing on March 25, 2011. Bids of €88.52 million were submitted, but none were accepted by the Treasury. Since €12.50 million worth of bills matured during the week, the outstanding balance of Treasury Bills decreased by €12.50 million, to stand at €377.76 million.

No Treasury Bill trading took place last week on the Malta Stock Exchange.

Today the Treasury will invite tenders for 182-day bills maturing on July 1, 2011.

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