On Thursday, December 8, the Governing Council of the European Central Bank 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 0.00, 0.25 and -0.40 per cent, respectively. The Governing Council continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.
Regarding non-standard monetary policy measures, the Governing Council decided to continue its purchases under the asset purchase programme (APP) at the current monthly pace of €80 billion until the end of March 2017. From April 2017, the net asset purchases are intended to continue at a monthly pace of €60 billion until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.
If, in the meantime, the outlook becomes less favourable or if financial conditions become inconsistent with further progress towards a sustained adjustment of the path of inflation, the Governing Council intends to increase the programme in terms of size and/or duration. The net purchases will be made alongside reinvestments of the principal payments from maturing securities purchased under the APP.
To ensure the continued smooth implementation of the Eurosystem’s asset purchases, the Governing Council decided to change some of the parameters of the APP. The following parameters will be adjusted on January 2, 2017:
• The maturity range of the public sector purchase programme (PSPP) will be broadened by decreasing the minimum remaining maturity for eligible securities from two years to one year.
• Purchases of securities under the APP with a yield to maturity below the interest rate on the ECB’s deposit facility will be permitted to the extent necessary.
ECB monetary operations
On Monday, December 5, the ECB announced its weekly MRO. The operation was conducted on Tuesday, December 6, and attracted bids from euro area eligible counterparties of €35.76 billion, €0.19 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 zero per cent, in accordance with current ECB policy.
On Wednesday, December 7, 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 $1.47 billion, which was allotted in full at a fixed rate of 0.95 per cent. During the week under review, participants in the first series of targeted longer-term refinancing operations had the option of terminating or reducing their outstanding amount in these operations before maturity. Accordingly, on December 21, a total of €14.16 billion will be repaid.
Domestic Treasury bill market
In the domestic primary market for Treasury bills, the Treasury invited tenders for 92-day and 274-day bills maturing on March 9 and September 7, 2017, respectively. Bids of €30 million were submitted for the 92-day bills, with the Treasury accepting €20.00 million, while bids of €35 million were submitted for the 274-day bills, with the Treasury accepting €6 million. Since €18.20 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by €7.80 million, to stand at €283.80 million.
The yield from the 92-day bill auction was -0.381 per cent, up by 0.7 basis point from bids with a similar tenor issued on December 1, representing a bid price of 100.0975 per 100 nominal. The yield from the 274-day bill auction was -0.385 per cent, down by 0.4 basis point from bids with a similar tenor issued on November 10, representing a bid price of 100.2939 per 100 nominal.
During the week under review, there was no trading on the Malta Stock Exchange.
Yesterday, the Treasury invited tenders for 28-day and 91-day bills maturing on January 12 and March 16, 2017, respectively.