Money market report for week ended July 8
On Thursday, July 7, the Governing Council of the European Central Bank (ECB) increased the rate on its Main Refinancing Operations (MRO) by 25 basis points to 1.50 per cent with effect from tomorrow, July 13, the settlement date for this week’s MRO. Accordingly, with effect from the same date the ECB also increased the rate on the marginal lending facility and on the overnight deposit facility by 25 basis points to 2.25 per cent and 0.75 per cent, respectively. In this manner, the corridor applicable to the ECB’s standing facilities was maintained at 75 basis points around the interest rate on the MRO.
ECB monetary operations
On Monday, July 4, the ECB announced its weekly MRO. The auction was conducted on Tuesday, July 5, and attracted bids from euro area eligible counterparties of €120.02 billion, €21.44 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 prevailing ECB policy.
On Tuesday, July 5, the ECB conducted an auction for a seven-day fixed-term deposit intended to absorb €74 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, July 1. 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 €96.0 billion, with the ECB allotting €74 billion or 77.08 per cent of the total amount bid for. The marginal rate on the auction was set at 0.9 per cent, with the weighted average rate at 0.75 per cent. On Wednesday, July 6, 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 1.09 per cent and once more, no bids were placed by euro area eligible counterparties.
Domestic Treasury Bill market
In the domestic primary market for Treasury Bills, the Treasury invited tenders for 91-day and for 272-day bills maturing on October 7, 2011 and April 5, 2012 respectively. Bids of €13.49 million were submitted for the 91-day bills, with the Treasury accepting €5.77 million, while bids of €27.21 million were submitted for the 272-day bills, with the Treasury accepting €15.06 million. Since €25.47 million worth of bills matured during the week, the outstanding balance of Treasury Bills decreased by €4.64 million, to stand at €343.47 million.
The yield from the 91-day bill auction was 1.084 per cent, i.e. 1.6 basis points higher than that on bills with a similar tenor issued on July 1, representing a bid price of 99.7267 per 100 nominal. The yield from the 272-day bill auction was 1.477 per cent, i.e. 2.3 basis points lower than on bills with a similar tenor issued on June 24, representing a bid price of 98.8964 per 100 nominal.
During the week under review, trading on the Malta Stock Exchange amounted to €3.92 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 273-day bills, maturing on October, 14, 2011 and April, 13, 2012, respectively.