Sustained demand for Treasury Bills

On Monday, January 3, the ECB announced its weekly Main Refinancing Operation (MRO). The auction was conducted on Tuesday, January 4, and attracted bids from euro area eligible counterparties of €195.69 billion, €32.18 billion lower 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.

The following day, the ECB also conducted an auction for a seven-day fixed-term deposit intended to absorb €73.50 billion. The operation was designed to sterilise the effect of purchases made under the Securities Markets Programme and settled by the previous Friday, December 31, 2010. 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 €92.08 billion, with the ECB allotting the full intended volume of €73.50 billion, or 79.82 per cent of the total bid amount. The marginal rate on the auction was set at 0.45 per cent, with the weighted average rate at 0.38 per cent.

The next day, the ECB conducted a seven-day US dollar funding operation through collateralised lending in conjunction with the US Federal Reserve. This attracted bids of $0.07 billion, which was allotted in full at a fixed rate of 1.18 per cent.

In the domestic primary market for Treasury Bills, the Treasury invited tenders for 91-day bills maturing on April 8, 2011, and for 182-day bills maturing on July 8, 2011. Bids of €50.45 million were submitted for the 91-day bills, with the Treasury accepting €10.30 million, while bids of €67.92 million were submitted for the 182-day bills, with the Treasury accepting €10.47 million. Since €24.60 million worth of bills matured during the week, the outstanding balance of Treasury Bills decreased by €3.83 million, to stand at €373.93 million.

The yield from the 91-day bill auction was 0.837 per cent, i.e. 15 basis points lower than on bills with a similar tenor issued on December 17, 2010, representing a bid price of 99.7889 per 100 nominal. The yield from the 182-day bill auction was 1.1070 per cent, i.e. 0.3 basis points higher than on bills with a similar tenor issued on December 17, 2010, representing a bid price of 99.4435 per 100 nominal.

Treasury bill trading on the Malta Stock Exchange amounted to €0.95 million during the week, with all trading being conducted by the Central Bank of Malta in its role as market maker.

On Tuesday, the Treasury invited tenders for 182-day bills maturing on July 15, 2011 and for 273-day bills maturing on October 14, 2011.