On Thursday, July 3, the Governing Council of the European Central Bank (ECB) decided that the interest rate on the main refinancing operations (MRO) and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.15 per cent, 0.40 per cent and -0.10 per cent respectively.
On the same day, the ECB announced that Governing Council meetings on monetary policy will change to a new six-week cycle from January 2015. Non-monetary policy meetings will continue to be held at least once a month.
Furthermore, reserve maintenance periods, during which banks are required on average to hold minimum reserves with the Eurosystem, will be extended to six weeks from four weeks, to match the adjusted frequency of monetary policy meetings.
At the same time, the ECB announced its commitment to publish regular accounts of the Governing Council’s monetary policy meetings from the January 2015 meeting. Each meeting’s accounts will be published before the date appointed for the following meeting.
The revised meeting schedule will be finalised at the Governing Council meeting of July 16 and posted on the ECB website immediately thereafter.
Furthermore, the Governing Council decided on further technical details of a series of targeted longer-term refinancing operations (TLTROs) announced on June 5. The TLTROs are designed to enhance the functioning of the monetary policy transmission mechanism by supporting bank lending to the real economy.
Under the scheme, banks will initially be able to borrow an amount equivalent up to 7 per cent of a specific part of their loans in two operations: namely, in September and December. After this, additional amounts can be borrowed in further TLTROs, depending on the evolution of the banks’ eligible lending activities in excess of bank-specific benchmarks. The additional borrowing allowance is limited to three times the difference between the net lending from April 30, 2014 and the benchmark at the time it is claimed. Further details on these operations can be found on the ECB website www.ecb.europa.eu.
ECB monetary operations
On Monday, June 30, the ECB announced its weekly MRO. The auction was conducted on Tuesday, July 1, and attracted bids from euro area eligible counterparties of €97.10 billion, €17.94 billion lower than the bid amount of the previous week. The amount was allotted in full at a fixed rate equivalent to the prevailing MRO rate of 0.15 per cent, in accordance with current ECB policy.
On Wednesday, July 2, 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 0.60 per cent and once again did not attract bids from euro area eligible counterparties.
Domestic Treasury bill market
In the domestic primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on October 3. Bids of €17.50 million were submitted for the 91-day bills, with the Treasury accepting €13.50 million. Since €5 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by €8.50 million, to stand at €415.67 million.
The yield from the 91-day bill auction was 0.316 per cent, i.e. 10.90 basis points higher than on bills with a similar tenor issued on June 13, representing a bid price of 99.9202 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 and 273-day bills maturing on October 10, 2014, and April 10, 2015, respectively.