On Thursday, November 7, the governing council of the European Central Bank reduced the rate on its main refinancing operations (MRO) by 25 basis points to 0.25 per cent with effect from tomorrow. Furthermore, also with effect from tomorrow, the ECB reduced the rate on the marginal lending facility by 25 basis points to 0.75 per cent. The rate on the overnight deposits remained unchanged at 0.00 per cent.
On the same day, the governing council announced its decision to continue conducting its MROs as fixed rate tender procedures with full allotment for as long as necessary, and at least until the end of the sixth maintenance period of 2015, on July 7, 2015. This procedure will also remain in place for the special-term refinancing operations with a maturity of one maintenance period, which will continue to be conducted for as long as necessary, and at least until the second quarter of 2015. The fixed rate in these operations will be the same as the MRO rate prevailing at the time.
Furthermore, the governing council has decided to conduct the three-month longer-term refinancing operations (LTRO) to be allotted on July 30, August 27, September 24, October 29, November 26 and December 17, 2014, and January 28, February 25, March 25, April 29, May 27 and June 24, 2015, as fixed rate tender procedures with full allotment. The rates in these three-month operations will be fixed at the average rate of the MROs over the life of the respective LTROs.
ECB monetary operations
On Monday, November 4, the ECB announced its weekly MRO. The auction was conducted on Tuesday, November 5, and attracted bids from euro area eligible counterparties of €89.52 billion, €0.20 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 0.50 per cent, in accordance with current ECB policy.
Also on Tuesday, November 5, the ECB conducted an auction for a seven-day fixed-term deposit intended to absorb €184 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, November 1.
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 0.50 per cent. It attracted bids amounting to €257.52 billion, with the ECB allotting €184.0 billion, or 71.45 per cent, of the total bid amount. The marginal rate on the auction was set at 0.13 per cent, with the weighted average rate at 0.10 per cent.
On Wednesday, November 6, 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 0.58 per cent and did not attract bids from euro area eligible counterparties.
Also on Wednesday, November 6, the ECB, in conjunction with the US Federal Reserve, conducted an 84-day US dollar funding operation through collateralised lending. This attracted bids of $0.13 billion, which was allotted in full at a fixed rate of 0.59 per cent.
Domestic Treasury bill market
In the domestic primary market for Treasury bills, the Treasury invited tenders for 28-day bills and 91-day bills maturing on December 6 and February 7, 2014, respectively. Bids of €24.5 million were submitted for the 28-day bills, with the Treasury accepting €3 million, while bids of €17.58 million were submitted for the 91-day bills, with the Treasury accepting €1 million. Since €28.8 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by €24.8 million, to stand at €401.75 million.
The yield from the 28-day bill auction was 0.510 per cent, i.e. 2.6 basis points lower than on bills with a similar tenor issued on November1, representing a bid price of 99.9603 per 100 nominal. The yield from the 91-day bill auction was 0.477 per cent, i.e. 0.6 basis point lower than on bills with a similar tenor issued on November 1, representing a bid price of 99.8796 per 100 nominal.
During the week under review, there was no trading on the Malta Stock Exchange.
Today, the Treasury will invite tenders for 27-day bills maturing on December 12.