On Thursday, October 6, the Governing Council of the ECB decided to keep the interest rate unchanged at 1.50 per cent on the main refinancing operations (MROs). Interest rates on the marginal lending and on the deposit facilities also remained unchanged, at 2.25 per cent and 0.75 per cent, respectively.
On the same day, the Governing Council also decided to conduct two longer-term refinancing operations (LTROs), one with a maturity of 12 months and the other with a maturity of approximately 13 months. These operations will be allotted on October 26 and December 21, 2011 as fixed rate tender procedures with full allotment. The rate applied for both operations will be fixed at the average of the rates in the MROs over the life of the relevant LTRO.
The Governing Council also announced its decision to conduct its MROs, as fixed rate tender procedures with full allotment as long as necessary, and at least until the end of the sixth maintenance period of 2012, on July 10, 2012. This procedure will also remain in place for the special-term refinancing operations with a maturity of one maintenance period, which will continue to be conducted for as long as necessary, and at least until the end of the sixth maintenance period of 2012. The fixed rate in these operations will be the same as the MRO rate prevailing at the time.
Additionally, the Governing Council also decided to conduct the three-month LTROs due to be allotted on January 25, February 29, March 28, April 25, May 30 and June 27, 2012 as fixed rate tender procedure with full allotment. In each of these three-month operations, the rate applied will be fixed at the average of the rates in the MROs over the life of the relevant LTRO.
Furthermore, the ECB Governing Council also decided to launch a new covered bond purchase programme. The purchases, for an intended amount of €40 billion, will have the capacity to be conducted in the primary and secondary markets and will be carried out through direct purchases.
Moreover, the purchases will begin in November 2011 and are expected to be completed by the end of October 2012.
ECB monetary operations
On Monday, October 3, the ECB announced its weekly MRO. The auction was conducted on Tuesday, October 4, and attracted bids from euro area eligible counterparties of €198.88 billion, €9.47 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 1.50 per cent, in accordance with current ECB policy.
On Tuesday, October 4, the ECB conducted an auction for a seven-day fixed-term deposit intended to absorb €160.5 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, September 30. 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 €240.55 billion, with the ECB allotting €160.50 billion or 66.72 per cent of the total amount bid for. The marginal rate on the auction was set at 1.02 per cent, with the weighted average rate at 0.96 per cent.
On Wednesday, October 5, the ECB conducted a seven-day US dollar funding operation through collateralised lending in conjunction with the US Federal Reserve. This operation attracted bids of $0.50 billion, which was allotted in full at a fixed rate of 1.09 per cent.
Domestic Treasury Bill market
In the domestic primary market for Treasury Bills, the Treasury invited tenders for 91-day and 181-day bills maturing on January 6, 2012 and April 5, 2012, respectively. Bids of €47.32 million were submitted for the 91-day bills, with the Treasury accepting €29.19 million, while bids of €28.25 million were submitted for the 181-day bills, with the Treasury accepting €5 million. Since €23.36 million worth of bills matured during the week, the outstanding balance of Treasury Bills increased by €10.83 million, to stand at €316.18 million.
The yield from the 91-day bill auction was 1.299 per cent, i.e. 17.2 basis points lower than that on bills with a similar tenor issued on September 23, 2011, representing a bid price of 99.6727 per 100 nominal. The yield from the 181-day bill auction was 1.400 per cent, i.e. five basis points lower than on bills with a similar tenor issued on September 30, 2011, representing a bid price of 99.3010 per 100 nominal.
During the week under review, trading on the Malta Stock Exchange amounted to €217,000 transacted 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 January 13, 2012 and July 13, 2012, respectively.