MSE | Wednesday, 06 February 2008

ECB announces first Long term Refinancing Operation for 2008

Money Market Report for the week ended 1 February 2008

Eurosystem Monetary Operations
On Monday, 28 January, the European Central Bank (ECB) announced the weekly Main Refinancing Operation (MRO) through which the Eurosystem injects liquidity with a standard maturity of seven days into the euro area money market. This operation attracted bids for €253.2 billion from euro area eligible counterparties, with the ECB allotting €167.5 billion, or 66.1% of the total amount bid for. The marginal rate, which is the rate at which the total tender allotment is exhausted, was set by the ECB at 4.18%, 2 basis points higher than the marginal rate of the previous week. Although one domestic counterparty participated in this operation, it was unsuccessful since its bids were submitted below the marginal rate.
On Tuesday, 29 January, the ECB also announced its monthly Long Term Refinancing Operation (LTRO). These liquidity providing operations are volume auctions with a three-month maturity and are aimed at providing additional longer-term refinancing to the financial sector. The Eurosystem does not, as a rule, send signals to the market through LTROs and therefore normally acts as a rate taker in such operations. Tuesday’s LTRO attracted bids for a €98.2 billion for an announced volume of €50 billion. The marginal rate was 4.21%. No eligible local counterparties participated in this operation.
On Friday, 11 January, the ECB also announced that, in conjunction with the Federal Reserve, it was providing dollar liquidity in order to contribute again to satisfying the exceptional needs for dollar funding and to facilitate the further normalisation of conditions in the money market. No eligible local counterparties requested dollars through this facility.

Domestic Treasury Bill Market
In the domestic primary market for Treasury bills, the Treasury invited tenders for 182-day bills maturing on 1 August 2008. Bids for €24.96 million worth of bills were submitted, and out of these the Treasury accepted bids for €20.6 million. As €4.8 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by €15.7 million to €316.8 million.
The latest 182-day yield resulting from the auction was 4.269%, down 6 basis points from the 4.329% registered on similar bills issued on 11 January 2008. This represented a bid price of 97.8874 per 100 nominal.
On Tuesday the Treasury invited tenders for 91-day bills maturing on 9 May 2008.
Treasury bill trading on the Malta Stock Exchange amounted to €0.71 million during the week, with all transactions being conducted by the CBM in its role as market maker in the secondary market. Off-Exchange transactions amounted to €45,000.