Money Market Report for the week ended October 15, 2010

On Monday, October 11, the ECB announced its weekly MRO.  The auction was conducted on Tuesday, October 12, and attracted bids from euro area eligible counterparties of €185.98 billion, €11.06 billion less than the amount bid for the previous week.  The bid amount was allotted in full, at a fixed rate equivalent to the prevailing main refinancing rate of 1.00 per cent, in accordance with current ECB policy.

On Tuesday, October 12, the ECB conducted a Special Term Refinancing Operation (STRO) with a maturity of 28 days.  This attracted bids for €52.24 billion, which were allotted in full at a fixed rate equivalent to the prevailing main refinancing rate of 1.00 per cent, also in accordance with current ECB policy.

On the same day, the ECB also conducted an auction for a seven-day fixed-term deposit intended to absorb €63.5 billion.  The operation was designed to sterilise the effect of purchases made under the Securities Market Programme and settled by the previous Friday, October 8.  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 1.00 per cent.  It attracted bids amounting to €103.10 billion and the ECB allotted the full intended volume of €63.5 billion, or 61.59 per cent of the total amount bid for.  The marginal rate on the auction was set at 0.75 per cent, with the weighted average rate standing at 0.6 per cent.

Also on Tuesday, October 12, being the last day of the reserve deposit maintenance period, the ECB conducted an overnight Fine-tuning Liquidity Absorbing Operation. This was carried out at a variable rate, with counterparties allowed to place up to two bids at a maximum of 1.00 per cent.  The operation attracted bids for €110.84 billion, of which the ECB accepted €108.99 billion, or 98.33 per cent of the total amount bid for.  The marginal rate on the operation was set at 0.80 per cent, while the weighted average rate was 0.76 per cent.

On Wednesday, October 13, the ECB conducted a seven-day US dollar funding operation through collateralised lending in conjunction with the US Federal Reserve. This attracted bids for $0.56 billion, which was allotted in full at a fixed rate of 1.19 per cent.

Domestic Treasury Bill Market
Meanwhile, in the domestic primary market for Treasury bills, the Treasury invited tenders for 28-day bills maturing on November 12, 2010, and for 273-day bills maturing on July 15, 2011.  Bids amounting to €29.70 million were submitted for the 28-day bills, with the Treasury accepting €24.70 million, while bids for €86.05 million were submitted for the 273-day bills, with the Treasury accepting only €4 million.  Since €40.45 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by €11.75 million, to stand at €456.13 million.

The yield from the 28-day bill auction was 0.775 per cent, i.e. 9 basis points higher than on bills with a similar tenor issued on October 8, 2010, representing a bid price of 99.9398 per 100 nominal.  The yield from the 273-day bill auction was 0.85 per cent, i.e. 42.4 basis points lower than on bills with a similar tenor issued on August 18, 2010, representing a bid price of 99.3595 per 100 nominal.

Treasury bill trading on the Malta Stock Exchange amounted to €1.2 million during the week, with all trades being conducted by the Central Bank of Malta in its role as market maker.

On Tuesday the Treasury invited tenders for 28-day bills maturing on November 19, 2010 and 91-day bills maturing on January 21, 2011.