On September 15, the European Central Bank (ECB) announced its weekly Main Refinancing Operation (MRO).
This attracted bids for €328.7 billion from euro area eligible counterparties, with the ECB allotting €150 billion, or 45.6 per cent of the total amount bid for. The marginal rate, which is the rate at which the total tender allotment is exhausted, was set by the ECB at 4.53 per cent, up by 14 basis points from the MRO of the previous week.
Given the turbulent conditions prevailing on the international money markets during the week under review, the ECB also announced three overnight liquidity providing fine-tuning operations. These operations attracted cumulative bids for a total of €242.05 billion from euro area eligible counterparties, with the ECB allotting, cumulatively, €125 billion, at marginal rates of 4.30 per cent, 4.32 per cent and 4.30 per cent, respectively.
On September 18, the ECB announced that it had decided to reinforce its joint action with the US Federal Reserve by adding overnight maturities to its operations providing US dollar funding to Eurosystem counterparties.
Whereas in its 28-day and 84-day Term Auction Facility (TAF) operations the Eurosystem injects US dollars at the Fed rate, in the new overnight operations US dollars are being provided through a single rate (Dutch) auction. In such overnight US dollar operations, the allotment interest rate applied for all satisfied bids is equal to the marginal rate.
In addition to these overnight operations, the ECB also announced that it would be increasing the amounts offered in the Term Auction Facility to $25 billion (from $20 billion) for the 28-day maturity operations and to $15 billion (from $10 billion) for the 84-day operations. Immediately following the announcement of September 18, the ECB conducted the first overnight dollar operation.
This attracted bids for $101.67 billion from euro area eligible counterparties, with the ECB allotting the pre-announced amount of $40 billion, or 39.34 per cent of the total amount bid for.
The marginal rate for the operation was four per cent. The second such overnight dollar operation was conducted on September 19.
This auction attracted bids for $96.7 billion, with the ECB once again allotting $40 billion, or 41.36 per cent of the total amount bid for.
The marginal rate for this operation was 3.5 per cent. The participation of domestic eligible credit institutions in these extraordinary operations conducted by the ECB, in both euro and US dollars, was minimal.
In the domestic primary market for Treasury bills, the Treasury invited tenders for 182-day bills maturing on March 20, 2009. Bids for €25 million were submitted, with the Treasury accepting only €11.6 million. Since €9.9 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by €1.7 million to €402.9 million.
The yield resulting from the auction was 4.839 per cent, 17.6 basis points lower than that on bills with a similar tenor issued on August 29. The latest yield represented a bid price of 97.612 per 100 nominal.
Treasury bill trading on the Malta Stock Exchange amounted to €3.4 million during the week, while off-Exchange transactions amounted to €433,000. All trades were conducted by the Central Bank of Malta in its role as market maker.
Today, the Treasury will invite tenders for 182-day bills maturing on March 27, 2009.