On October 13, the ECB announced its weekly Main Refinancing Operation (MRO). This attracted bids for €310.4 billion from euro area eligible counterparties, with the ECB allotting the total amount bid, at the main refinancing rate of 3.75 per cent.
As announced by the ECB, all forthcoming MROs will be carried out through a fixed rate tender procedure with full allotment at the interest rate on the main refinancing operation. This measure is intended to align market rates closer to the policy rate.
The ECB continued to provide US dollar funding via overnight operations both on October 14 and 15. These operations, each with an intended volume of $100 billion, had respective marginal rates of 0.20 per cent and 0.50 per cent. As from October 16, overnight US dollar operations ceased to be conducted on a daily basis and will henceforth only be conducted when necessary in view of market developments.
On October 13, the ECB, the Federal Reserve, the Bank of England (BoE), the Bank of Japan and the Swiss National Bank (SNB) jointly announced further measures to improve liquidity in short-term US dollar funding markets. The ECB, the BoE and the SNB will start conducting tenders of US dollar funding with a seven-day maturity, together with the current 28- and 84-day maturities, at fixed interest rates for full allotment.The fixed rates will be set in advance of each operation, and counterparties will be able to borrow any amount they need against appropriate collateral in each jurisdiction.
On October 15, the ECB, in conjunction with the US Federal Reserve, conducted the first seven-day US dollar funding operation. This attracted bids for $170.9 billion, which were fully allotted at a fixed rate of 2.277 per cent.
The ECB also announced that as from today, and at least until the end of January, in parallel with all above-mentioned US dollar tenders, the Eurosystem will also offer dollar liquidity through EUR/USD foreign exchange swaps. These foreign exchange swap tenders will be carried out at a fixed price (swap points) with full allotment.
On October 15, the ECB also announced that, in cooperation with the SNB, it would take measures to improve liquidity in the Swiss franc money markets. Hence. each Monday, starting from yesterday, the Eurosystem and the SNB will conduct EUR/CHF foreign exchange swaps, providing Swiss francs against the euro with a term of seven days at a fixed price. This measure will be in place for as long as needed, and at least until January.
Foreign exchange swaps are instruments which involve the simultaneous spot purchase/sale and forward sale/purchase of one currency against another.
In the domestic primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on January 16. Bids for €18.65 million were submitted, with the Treasury accepting €10.66 million. Since €15.54 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by €4.88 million to €396.97 million.
The yield resulting from the auction was 4.319 per cent, 43.1 basis points lower than that on bills with a similar tenor issued on September 12. This substantial decrease reflects the impact of the 50 basis point cut in the ECB's minimum bid rate for main refinancing operations (MRO), effective from October 15. The latest yield represented a bid price of 98.92 per 100 nominal.
Today the Treasury will invite tenders for 91-day bills maturing on January 23.
Treasury bill trading on the Malta Stock Exchange amounted to €2.37 million during the week, with all trades being conducted by the Central Bank of Malta in its role as market maker.