Money Market Report – 6 May 2011

Interest rates on the marginal lending and deposit facilities were also left unchanged at 2.00% and 0.50%, respectively.

On Monday, May 2, the ECB announced its weekly Main Refinancing Operation.  The auction was conducted on Tuesday, May 3 and attracted bids from euro area eligible counterparties of €127.54 billion, €9.66 billion higher than the amount bid for in the previous week. The bid amount was allotted in full at a fixed rate equivalent to the prevailing main refinancing rate of 1.25%, in line with the current ECB policy.

On Tuesday, May 3, the ECB conducted an auction for a seven-day fixed-term deposit intended to absorb €76 billion.  The operation was designed to sterilise the effect of purchases made under the Securities Markets Programme that were settled and not yet matured by the previous Friday, April 29.  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 1.25%. It attracted bids amounting to €62.18 billion, with the ECB allotting the full amount bid for. The marginal rate on the auction was set at 1.25%, with the weighted average rate being 1.16%.

On Wednesday, May 4, the ECB conducted a seven-day US dollar funding operation through collateralised lending in conjunction with the US Federal Reserve.  This was carried out at a fixed rate of 1.10% 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 182- day bills and 273-day bills maturing on November 4, 2011 and February 3, 2012 respectively. Bids of €24.50 million were submitted for the 182-day bills, with the Treasury accepting €9.50 million, whilst bids of €30.25 million were submitted for the 273-day bills with the Treasury accepting €6.85 million. Since €39.8 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by €23.45 million, to stand at €365.74 million.

The yield from the 182-day bill auction was 1.484%, i.e. 13.3 basis points higher than on bills with a similar tenor issued on April 8, 2011, representing a bid price of 99.2553 per 100 nominal. The yield from the 273-day bill auction was 1.681%, i.e. 12.1 basis points higher than on bills with a similar tenor issued on April 15, 2011, representing a bid price of 99.7413 per 100 nominal.

During the week under review, trading on the Malta Stock Exchange amounted to €0.1 million, conducted off-exchange by the Central Bank of Malta in its role as market-maker.

On Tuesday the Treasury invited tenders for 182-day bills maturing on November 11, 2011.