Money Market Report - August 12

On Monday, August 8, the ECB announced its weekly Main Refinancing Operation (MRO).  The auction was conducted on Tuesday, August 9, and attracted bids from euro area eligible counterparties of €157.07 billion, €14.95 billion lower than the amount bid for in the previous week. The amount bid for was allotted in full at a fixed rate equivalent to the prevailing main refinancing rate of 1.50%, in accordance with current ECB policy.

On Tuesday, August 9, the ECB conducted a Special Term Refinancing Operation with a maturity of 35 days. This attracted bids of €75.75 billion which were allotted in full at a fixed rate equivalent to the prevailing main refinancing rate of 1.50%, also in accordance with the current ECB policy.

Also on Tuesday, August 9, the ECB conducted an auction for a seven-day fixed-term deposit intended to absorb €74 billion. This operation is 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, August 5.  The auction was carried out at a variable rate, with euro area eligible counterparties allowed to place up to two bids at a maximum rate of 1.50%. It attracted bids amounting to €95.43 billion, with the ECB allotting €74 billion or 77.54% of the total amount bid for. The marginal rate on the auction was set at 1.14%, with the weighted average rate at 1.01%.

Furthermore, on Tuesday, August 9, being the last day of the reserve deposit maintenance period, the ECB conducted an overnight Fine-tuning Liquidity Absorbing Operation at a variable rate, with counterparties allowed to place up to two bids at a maximum rate of 1.50%.  The operation attracted bids of €145.15 billion, with the ECB accepting the full amount. The marginal rate on the operation was set at 1.30%, while the weighted average rate was 1.27%.

On Wednesday, August 10, in accordance with the Governing Council decision of August 4, 2011, the ECB conducted a Longer-Term Refinancing Operation with a maturity of approximately six months. This operation attracted bids of €49.75 billion from euro area eligible counterparties, which amount was allotted in full at a rate fixed at the average minimum bid rate of the MROs over the life of the operation.

Also on Wednesday, August 10, 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 1.08% and, once more, no bids were placed by euro area eligible counterparties.

Domestic Treasury Bill Market

In the domestic primary market for Treasury bills, the Treasury invited tenders for 91-day and 181-day bills maturing on November 11, 2011 and February 9, 2012, respectively.  Bids of €40.65 million were submitted for the 91-day bills, with the Treasury accepting €25.65 million, while bids of €31.10 million were submitted for the 181-day bills, with the Treasury accepting only €4.0 million. Since €28.88 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by €0.77 million, to stand at €323.92 million.

The yield from the 91-day bill auction was 1.461%, i.e. 17.6 basis points lower than that on bills with a similar tenor issued on August 5, 2011, representing a bid price of 99.6321 per 100 nominal. The yield from the 181-day bill auction was 1.7990%, i.e. 27.7 basis points higher than on bills with a similar tenor issued on June 10, 2011, representing a bid price of 99.1036 per 100 nominal.

During the week under review, there was no trading on the Malta Stock Exchange.

On Tuesday, the Treasury invited tenders for 28-day bills and 91-day bills, maturing on September 16, 2011 and November 18, 2011, respectively.