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Money market report for the week ended December 14

ECB decisions

On Thursday, December 13, the Governing Council of the ECB decided, in cooperation with the Bank of Canada, the Bank of England, the Bank of Japan, the Federal Reserve and the Swiss National Bank, to extend the temporary network of reciprocal swap lines until February 1, 2014.

This action will enable the eurosystem to continue to provide euro to those central banks when required, and to provide to its counterparties, when necessary, Japanese yen, pounds sterling, Swiss francs and Canadian dollars.

The Governing Council also decided that the ECB will, until further notice, continue to conduct regular US dollar liquidity-providing operations with maturities of approximately one week and three months.

ECB Monetary Operations

On Monday, December 10, the ECB announced its weekly main refinancing operation The auction was conducted on Tuesday, December 11, and attracted bids from euro area eligible counterparties of €73.22 billion, €2.45 billion higher than the bid amount in the previous week. The amount was allotted in full at a fixed rate equivalent to the prevailing main refinancing rate of 0.75 per cent, in accordance with current ECB policy.

On Tuesday, December 11, the ECB conducted a special-term refinancing operation with a maturity of 35 days. This attracted bids of €15.3 billion, which was allotted in full at a fixed rate equivalent to the prevailing main refinancing rate of 0.75 per cent, also in accordance with the current ECB policy.

Also on Tuesday, December 11, the ECB conducted an auction for a seven-day fixed-term deposit intended to absorb €208.5 billion. This operation was 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, December 7. The auction was carried out at a variable rate, with euro area eligible counterparties allowed to place up to four bids at a maximum rate of 0.75 per cent. It attracted bids amounting to €405.36 billion with the ECB allotting €208.5 billion, or 51.44 per cent of the total bid amount. The marginal rate on the auction was once again set at 0.01 per cent, with the weighted average rate also set at 0.01per cent.

Furthermore, on Wednesday, December 12, the ECB also conducted a seven-day US dollar funding operation through collateralised lending in conjunction with the US Federal Reserve. This operation attracted bids of $3.26 billion, which was allotted in full at a fixed rate of 0.66 per cent.

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 March 15 and on June 14, 2013, respectively. Bids of €79.45 million were submitted for the 91-day bills, with the Treasury accepting €14.2 million. Bids of €24 million were submitted for the 182-day bills, with the Treasury accepting €5 million. Since €38.91 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by €19.71 million, to stand at €219.74 million.

The yield from the 91-day bill auction was 0.932 per cent, i.e. 6.3 basis points lower than on bills with a similar tenor issued on December 7, 2012, representing a bid price of 99.7650 per 100 nominal. The yield from the 182-day bill auction was 1.148 per cent, i.e. 1.7 basis points lower than on bills with a similar tenor issued on December 7, representing a bid price of 99.4230 per 100 nominal.

During the week under review, Treasury bill trading on the Malta Stock Exchange amounted to €0.4 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 maturing on March 22.

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