On Thursday, December 18, the ECB announced that, as from January 21, the standing facilities interest rates corridor, which on October 9 had been reduced to 100 basis points around the prevailing interest rate on the main refinancing operation, would be restored to 200 basis points. Therefore, the rate on the marginal lending facility would be increased from 50 to 100 basis points above this rate, i.e. to 3.50 per cent, and the rate on the deposit facility would be reduced from 50 to 100 basis points below it, i.e. to 1.50 per cent.
At the same time the ECB announced that the main refinancing operations would continue to be carried out through a fixed rate tender procedure, with full allotment, beyond the maintenance period ending on January 20. In fact, this measure would remain in place for as long as needed, and at least until the last allotment of the third maintenance period in 2009 on March 31.
On Monday, December 15, the ECB announced its weekly Main Refinancing Operation (MRO). This attracted bids for €209.72 billion from euro area eligible counterparties, at a fixed rate equivalent to the main refinancing rate of 2.50 per cent.
On the same day, the Eurosystem and the Swiss National Bank (SNB) conducted a EUR/CHF foreign exchange swap, with a six-day maturity, to provide Swiss Franc liquidity against euro. This operation attracted bids for €9.73 billion, at a fixed price of -5.49 swap points.
On Tuesday, December 16, the ECB, in conjunction with the US Federal Reserve, conducted a 28-day US dollar funding operation through collateralised lending. This attracted bids for $47.59 billion, at a fixed rate of 1.28 per cent. In parallel with this operation, the Eurosystem also offered 28-day dollar liquidity through a EUR/USD foreign exchange swap operation. This attracted bids for $0.07 billion at a fixed price of -6.00 swap points.
On the same day, the ECB also announced a standard Longer-Term Refinancing Operation (LTRO) with a maturity of 98 days. In this LTRO, the ECB received bids for €50.79 billion, at a fixed rate equivalent to the ECB's main refinancing rate of 2.50 per cent.
On Wednesday, December 17, the ECB, in conjunction with the US Federal Reserve, conducted a five-day US dollar funding operation through collateralised lending.
This attracted bids for $41.55 billion, at a fixed rate of 1.18 per cent. In parallel with this operation, the Eurosystem also offered five-day dollar liquidity through a EUR/USD foreign exchange swap operation which attracted bids for $0.05 billion at a fixed price of -1.30 swap points.
On the same day, the Eurosystem, in cooperation with the SNB, conducted another EUR/CHF foreign exchange swap, this time with an 84-day maturity.
This operation attracted bids for €0.65 billion, at a fixed price of -70.63 swap points.
The amounts bid in all the above-mentioned operations were allotted in full.
In the domestic primary market for Treasury bills, the Treasury invited tenders for 182-day bills maturing on June 19, 2009. Bids for €47.13 million were submitted, with the Treasury accepting €5.00 million. Since €22.87 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by €17.87 million to €345.36 million.
The yield resulting from the auction was 2.750 per cent, 88.7 basis points lower than that on bills with a similar tenor issued on December 5. This substantial decrease in the six-month Treasury bill yield reflected the impact of the 75 basis point cut in the ECB's minimum bid rate for the main refinancing operations (MRO) effective from December 10. The latest yield represented a bid price of 98.6288 per 100 nominal.
On December 29, the Treasury will invite tenders for 179-day bills maturing on June 26, 2009.
Treasury bill trading on the Malta Stock Exchange amounted to €4.09 million during the week, with €4.05 million trades being conducted by the Central Bank of Malta in its role as market maker. Off-Exchange transactions amounted to €137,000.