On Thursday, January 22, the Governing Council of the European Central Bank (ECB) decided that the interest rate on the main refinancing operations (MRO), the marginal lending facility and the deposit facility will remain unchanged at 0.05 per cent, 0.30 per cent and -0.20 per cent respectively.
Also on Thursday, January 22, the Governing Council of the ECB decided that the interest rate on the remaining six targeted longer-term refinancing operations (TLTRO) would be equal to the rate on the Eurosystem’s MROs prevailing at the time when each TLTRO is conducted. As a result of this decision, the 10 basis point spread over the MRO rate which had been applied to the first two TLTROs has been eliminated for the forthcoming TLTROs to be conducted between March 2015 and June 2016.
Furthermore, on Thursday, January 22, the Governing Council of the ECB announced an expanded asset purchase programme to fulfil the ECB’s price stability mandate. The programme will now see the ECB add the purchase of sovereign bonds to its existing private sector asset purchase programmes to address the risks of a too prolonged period of low inflation. It will also encompass the asset-backed securities purchase programme and the covered bond purchase programme, which were both launched late last year. Combined monthly purchases will amount to €60 billion, which are planned to be carried out until at least September 2016 and in any case until the Governing Council sees a sustained adjustment in the path of inflation that is consistent with its aim of achieving inflation rates below, but close to, two per cent over the medium term.
ECB monetary operations
On Monday, January 19, the ECB announced its weekly MRO. The auction was conducted the following day and attracted bids from euro area eligible counterparties of €125.26 billion, €11.27 billion higher 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 0.05 per cent, in accordance with current ECB policy.
On Wednesday, January 21, 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 0.63 per cent and 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 28-day and 91-day bills maturing on February 20 and April 24, respectively. Bids of €7 million were submitted for the 28-day bills, with the Treasury accepting €2.10 million, while bids of €41 million were submitted for the 91-day bills, with the Treasury accepting €13 million. Since €2 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by €13.10 million, to stand at €198.54 million.
The yield from the 28-day bill auction was 0.020 per cent, i.e. 0.5 basis point higher than on bills with a similar tenor issued on January 9, representing a bid price of 99.9984 per 100 nominal.
The yield from the 91-day bill auction was 0.023 per cent, i.e. 0.2 basis point lower than on bills with a similar tenor issued on January 16, representing a bid price of 99.9942 per 100 nominal.
During the week under review, there was no trading on the Malta Stock Exchange.
Today, the Treasury will invite tenders for 28-day and 90-day bills maturing on February 27 and April 30, respectively.