Money Market Report for the week ended 10 April 2009
ECB continues to inject Euro, US dollar and Swiss Franc liquidity
ECB Monetary Operations
On Monday, 6 April, the ECB announced its weekly Main Refinancing Operation (MRO). This attracted bids for €237.64 billion from euro area eligible counterparties, at a fixed rate equivalent to the new prevailing main refinancing rate of 1.25%.
On the same day, the Eurosystem and the Swiss National Bank (SNB) conducted a EUR/CHF foreign exchange swap, with a 7-day maturity, to provide Swiss franc liquidity against euro. This operation attracted bids for €50.91 billion. As this exceeded the intended volume of €25 billion, participating counterparties received 49.10% of the amounts bid for. This operation was conducted at a fixed price of -2.68 swap points.
On Tuesday, 7 April, the ECB conducted a Special Term Refinancing Operation (STRO) with a maturity of 35-days. The ECB received bids for €131.84 billion, at a fixed rate equivalent to the ECB’s main refinancing rate of 1.25%.
On the same day, the ECB announced a supplementary Longer-Term Refinancing Operation (LTRO) with a maturity of 182 days. In this LTRO, the ECB received bids for €36.09 billion, at a fixed rate equivalent to the ECB’s main refinancing rate of 1.25%.
On Tuesday, 7 April, it being the end of the reserve deposit maintenance period, the ECB also conducted an overnight liquidity-absorbing Fine Tuning Operation. This was carried out at a variable rate, with the ECB saying that it would pay depositing banks up to 1.50% interest on their cash and put no limit on the amount of bids it would accept. In total, banks bid for €105.49 billion, with the ECB accepting €103.88 billion, or 98.47% of the total amount bid for. The marginal rate on this operation was set at 1.30%, with the resulting weighted average rate being 1.12%.
On the same day, the ECB, in conjunction with the US Federal Reserve, conducted a 28-day US dollar funding operation through collateralised lending. This attracted bids for $19.42 billion, which amount was allotted in full at a fixed rate of 1.20%.
On Wednesday, 8 April, the ECB, in conjunction with the US Federal Reserve, conducted another US dollar funding operation, this time with a tenor of 7-days. This attracted bids for $77.47 billion, which amount was again allotted in full at a fixed rate of 1.18%. The amounts bid for in the MRO and LTRO euro operations were allotted in full in accordance with the ECB’s press release dated 5 March 2009.
Domestic Treasury Bill Market
In the domestic primary market for Treasury bills, the Treasury invited tenders for 183-day bills maturing on 9 October 2009. Bids for €55.28 million were submitted, with the Treasury accepting €29.35 million. Since €29.92 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by €0.57 million to €559.32 million. The yield resulting from the auction was 2.045%, that is, 29.8 basis points less than that on bills with a similar tenor issued on 3 April 2009. This substantial decrease in the 183-day Treasury bill yield reflected the impact of the 25 basis point cut in the ECB’s main refinancing rate effective from 8 April 2009. The latest yield represented a bid price of 98.9712 per 100 nominal.
On Tuesday the Treasury invited tenders for 91-day bills maturing on 17 July 2009. Treasury bill trading on the Malta Stock Exchange amounted to €4.59 million during the week, with €4.24 million trades being conducted by the Central Bank of Malta in its role as market maker and €0.36 million trades being conducted by other brokers. Off-exchange transactions amounted to €0.59 million.
