Money market report for week ending August 5
ECB decisions
On Thursday, August 4, the ECB Governing Council announced its decision to conduct 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 last maintenance period of 2011 on January 17, 2012.
This procedure will also remain in use for the special-term refinancing operations with a maturity of one maintenance period, which will continue to be conducted for as long as required, at least until the end of this year. The fixed rate in these operations will be the same as the MRO rate prevailing at the time.
The Council also decided to conduct the three-month Longer-Term Refinancing Operations (LTROs) to be settled on October 26, November 30 and December 21, 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. Furthermore, the Governing Council decided to conduct a liquidity-providing supplementary LTRO with a maturity of approximately six months. This operation will be conducted as a fixed rate tender procedure with full allotment.
The rates in these operations will be fixed at the average rate of the MROs over the life of the supplementary LTRO. This operation will be announced on August 9, with allotment on August 10 and settlement on August 11. On the same day, the ECB Governing Council also decided to keep the interest rate unchanged at 1.50 per cent on its MROs. Interest rates on the marginal lending and deposit facilities also remained unchanged, at 2.25 per cent and 0.75 per cent, respectively.
ECB monetary operations
On Monday, August 1, the ECB announced its weekly MRO. The auction was conducted on Tuesday, August 2, and attracted bids from euro area eligible counterparties of €172.02 billion, €7.82 billion higher than the amount bid for in the previous week.
The amount was allotted in full at a fixed rate equivalent to the prevailing main refinancing rate of 1.50 per cent, in accordance with current ECB policy.
On Tuesday, August 2, 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 29.
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 1.50 per cent. It attracted bids amounting to €86.77 billion, with the ECB allotting €74 billion or 85.28 per cent of the total amount bid for. The marginal rate on the auction was set at 0.99 per cent, with the weighted average rate at 0.92 per cent. On Wednesday, August 3, 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 1.15 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 28-day and 91-day bills maturing on September 2 and November 4 respectively.
Bids of €32.63 million were submitted for the 28-day bills, with the Treasury accepting €5.35 million, while bids of €44.65 million were submitted for the 91-day bills, with the Treasury accepting €23.75 million.
Since €33.50 million worth of bills matured during the week, the outstanding balance of Treasury Bills decreased by €4.40 million, to stand at €323.15 million.
The yield from the 28-day bill auction was 1.400 per cent, i.e. unchanged from the previous issue of July 29, 2011, representing a bid price of 99.8912 per 100 nominal.
The yield from the 91-day bill auction was 1.637 per cent, i.e. 16.1 basis points higher than that on bills with a similar tenor issued on July 29, representing a bid price of 99.5879 per 100 nominal.
During the week under review, Treasury Bill trading on the Malta Stock Exchange amounted to €0.869 million and was conducted by the Central Bank of Malta in its role as market-maker.
Today, the Treasury will invite tenders for 91-day bills and 181-day bills maturing on November 11, 2011 and February 9, 2012, respectively.