On January 19, 2017, 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 (DFR) will remain unchanged at 0.00 per cent, 0.25 per cent 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 confirmed that it will continue to make purchases under the asset purchase programme (APP) at the current monthly pace of €80 billion until the end of March.
From April, the net asset purchases are intended to continue at a monthly pace of €60 billion until the end of December 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.
The net purchases will be made alongside reinvestments of the principal payments from maturing securities purchased under the APP. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.
Furthermore, the Governing Council decided that no purchases below the DFR will be conducted under the third covered bond purchase programme (CBPP3), the asset-backed securities purchase programme (ABSPP), or the corporate sector purchase programme (CSPP). With regard to the public sector purchase programme (PSPP), for each jurisdiction, priority will be given to purchases of assets with yields above the DFR. The amount of purchases that have to be made at yields below the DFR will vary among jurisdictions. This amount may also change over time, reflecting changes in market interest rates relative to the DFR.
ECB monetary operations
On January 16, the ECB announced its weekly MRO. The operation was conducted the following day, and attracted bids from euro area eligible counterparties of €32.33 billion, €0.01 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 0.00 per cent, in accordance with current ECB policy.
On January 18, 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 $0.27 billion, which was allotted in full at a fixed rate of 1.16 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 for settlement value January 19, maturing on April 20 and July 20, respectively.
Bids of €55.20 million were submitted for the 91-day bills, with the Treasury accepting €13.20 million, while bids of €50 million were submitted for the 182-day bills, with the Treasury accepting €2 million. Since €24 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by €8.80 million, to stand at €268.20 million.
The yield from the 91-day bill auction was -0.396 per cent, unchanged from bids with a similar tenor issued on January 12, representing a bid price of €100.1002 per €100 nominal. The yield from the 182-day bill auction was -0.391 per cent, down by 0.1 basis point from bids with a similar tenor also issued on January 12, representing a bid price of €100.1981 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 182-day bills maturing on February 23, and July 27, respectively.