On January 25 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 will remain unchanged at 0.00 per cent, 0.25 per cent and 0.40 per cent, respectively. The Governing Council expects the key ECB interest rates to remain at their present 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 confirms that the net asset purchases, at the new monthly pace of €30 billion, are intended to run until the end of September 2018, 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. 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 asset purchase programme (APP) in terms of size and/or duration. The Eurosystem will reinvest the principal payments from maturing securities purchased under the APP for an extended period of time after the end of its net asset purchases, and in any case for as long as necessary. This will contribute both to favourable liquidity conditions and to an appropriate monetary policy stance.
ECB monetary operations
On January 22 the ECB announced its weekly MRO. The operation was conducted on January 23 and attracted bids from euro area eligible counterparties of €2.16 billion, €0.26 billion lower 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 24 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 $0.67 billion, which was allotted in full at a fixed rate of 1.91 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 25, maturing on April 26 and July 26 respectively. Bids of €45 million were submitted for the 91-day bills, with the Treasury accepting €10 million, while bids of €47 million were submitted for the 182-day bills, with the Treasury accepting €5 million. Since €20 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by €5 million, to stand at €192 million.
The yield from the 91-day bill auction was -0.379 per cent, down by 0.7 basis point from bids with a similar tenor issued on January 18, representing a bid price of €100.0959 per €100 nominal. The yield from the 182-day bill auction was -0.343 per cent, down by 0.2 basis point from bids with a similar tenor issued on January 11, representing a bid price of €100.1737 per €100 nominal.
During the week under review, there was no trading on the Malta Stock Exchange. Today the Treasury will invite tenders for 91-day bills maturing on May 3.