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Money market report for week ending September 9

ECB decision

Last Thursday, the governing cou-ncil of the ECB decided to keep the interest rate on the Main Refinancing Operations (MROs) un-changed at 1.50 per cent. Interest rates on the marginal lending facility and on the deposit facility were also left unchanged, at 2.25 per cent and 0.75 per cent, respectively.

ECB Monetary Operations

On Monday, September 5, the ECB announced its weekly MRO. The auction was conducted on Tuesday, September 6, and att-racted bids from euro area eligible counterparties of €115.41 billion, €6.26 billion lower 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.

Also on Tuesday, the ECB conducted an auction for a seven-day fixed-term deposit intended to absorb €129 billion. This operation is designed to sterilise the effect of purchases made under the Securities Markets Program-me that were settled but had not yet matured by the previous Friday, September 2. 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 €173.58 billion, with the ECB allotting €129 billion or 74.31 per cent of the total amount bid for. The marginal rate on the auction was set at 1.05 per cent, with the weighted average rate standing at one per cent .

On Wednesday, September 7, the ECB conducted a seven-day US dollar funding operation through collateralised lending in conjunction with the US Federal Res-erve.This operation was carried out at a fixed rate of 1.10 per cent and 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 182-day bills maturing on December 9, 2011 and on March 9, 2012, respectively. Bids of €27.07 million were submitted for the 91-day bills, with the Treasury accepting only €2.35 million, while bids of €25.45 million were submitted for the 182-day bills, with the Treasury accepting only €2.20 million. Since €2.40 million worth of bills matured during the week, the outstanding balance of Treasury Bills increased by €2.15 million, to stand at €316.75 million. The yield from the 91-day bill auction was 1.359 per cent, i.e. 4.1 basis points lower than that on bills with a similar tenor issued on September 2, 2011, representing a bid price of 99.6577 per 100 nominal. The yield from the 182-day bill auction was 1.5910 per cent, i.e. 20.8 basis points lower than that on the 182-day bill issued on August 12, representing a bid price of 99.2021 per 100 nominal.

During the week under review, there was no trading on the Malta Stock Exchange.

Today, the Treasury will invite tenders for 91-day bills maturing on December 16.

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