MSE | Wednesday, 02 March 2008

Increase in the Marginal Rate of the ECB’s Monetary Operations

Money Market Report for the week ended 28 March 2008

Eurosystem Monetary Operations
On Tuesday 25 March, the European Central Bank (ECB) held its weekly Main Refinancing Operation (MRO). This operation attracted bids for €302.5 billion from euro area eligible counterparties. The ECB allotted €216 billion, or 71.4% 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 4.23%, seven basis points higher than that of the previous week.
On Tuesday 25 March, the ECB also announced a Longer Term Refinancing Operation (LTRO) operation through which it was prepared to inject funds for a 91-day period. This operation attracted bids for €131.3 billion from euro area eligible counterparties, with the ECB allotting €50 billion, or 38.1% of the total amount bid for. The marginal rate was set by the ECB at 4.44%. The previous ECB LTRO, held on 13 March 2008, resulted in a marginal rate of 4.25%.
As announced in a press release on 11 March, during the week the ECB, in conjunction with the Federal Reserve, provided 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. A total of $15 billion were allotted at a fixed exchange rate of 2.615%.

Domestic Treasury Bill Market
In the domestic primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on 27 June 2008. Out of the €15.9 million worth of bids submitted, the Treasury accepted bids for €8.5 million, or 53.5% of the total. At the same time €15.5 million worth of bills matured during the week, reducing the outstanding balance of Treasury bills to €340.6 million.
The yield resulting from the auction was 4.273%, 10 basis points higher than that on bills with a similar tenor issued on 14 March 2008. The latest yield represented a bid price of 98.9314 per 100 nominal.
On Tuesday the Treasury invited tenders for 28-day bills maturing 2 May 2008 and 91-day bills maturing 4 July 2008. The following week the Treasury will invite tenders for 182-days maturing 10 October 2008.
Treasury bill trading on the Malta Stock Exchange amounted to €1.2 million during the week, with all trades being conducted by the Bank in its role as market maker. No transactions were conducted off-Exchange.