On Thursday, June 9, the Governing Council of the ECB decided to keep the interest rate on the main refinancing operations (MROs) unchanged at 1.25 per cent. Interest rates on the marginal lending facility and the deposit facility were also left unchanged, at two per cent and 0.50 per cent, respectively.
The Governing Council also decided to continue conducting its MROs as fixed rate tender procedures with full allotment for as long as necessary, and at least until the end of the ninth maintenance period on October 11. 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 third quarter of this year.
The fixed rate in these special-term refinancing operations will be the same as the MRO rate prevailing at the time. The ECB also decided to conduct the three-month longer-term refinancing operations (LTROs) to be allotted on July 27, August 31 and September 28 as fixed rate tender procedures with full allotment. The rates in these operations will be fixed at the average rate of the MROs over the life of the respective LTRO.
On Monday, June 6, the ECB announced its weekly MRO. The auction was conducted on June 7, and attracted bids from euro area eligible counterparties of €102.44 billion, €8.32 billion lower than the amount bid for in the previous week. The bid amount was allotted in full at a fixed rate equivalent to the prevailing main refinancing rate of 1.25 per cent, in accordance with current ECB policy.
On Tuesday, June 7, the ECB conducted an auction for a seven-day fixed-term deposit intended to absorb €75 billion. This operation is designed to sterilise the effect of purchases made under the Securities Markets Programme that were settled but had not yet matured by the previous Friday, June 3. 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 1.25 per cent. It attracted bids amounting to €93.59 billion, with the ECB allotting €75 billion or 80.14 per cent of the total amount bid for. The marginal rate on the auction was set at 1.03 per cent, with the weighted average rate at 0.90 per cent.
On Wednesday, June 8, the ECB conducted a seven-day US dollar funding operation through collateralised lending in conjunction with the US Federal Reserve. This operation was carried out at a fixed rate of 1.10 per cent and once more, no bids were placed by euro area eligible counterparties.
In the domestic primary market for Treasury Bills, the Treasury invited tenders for 91-day bills maturing on September 9, 2011, and for 182-day bills maturing on December 9. Bids of €6.53 million were submitted for the 91-day bills, with the Treasury accepting €2.40 million, while bids of €7.30 million were submitted for the 182-day bills, with the Treasury accepting €2.30 million. Since €5.25 million worth of bills matured during the week, the outstanding balance of Treasury Bills decreased slightly by €0.55 million, to stand at €349.16 million.
The yield from the 91-day bill auction was 1.157 per cent, i.e. 7.3 basis points lower than that on bills with a similar tenor issued on June 3, 2011, representing a bid price of 99.7084 per 100 nominal. The yield from the 182-day bill auction was 1.522 per cent, i.e. 14.5 basis points lower than on bills with a similar tenor issued on May 13, 2011, representing a bid price of 99.2364 per 100 nominal.
During the week under review, trading on the Malta Stock Exchange amounted to €1.38 million 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 and 182-day bills, maturing on September 16 and December 16, respectively.