MSE | Wednesday, 03 February 2010

ECB to discontinue US$ liquidity-providing

ECB Monetary Operations
On Monday, 25 January, the European Central Bank (ECB) announced its weekly Main Refinancing Operation (MRO). This auction, which was conducted on Tuesday, attracted bids for €63.44 billion from euro area eligible counterparties, €5.42 billion more 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 1.00 per cent in accordance with the current ECB policy.
As announced in a press release dated 18 January, on Monday 25 January, the Eurosystem and the Swiss National Bank (SNB) conducted the last EUR/CHF foreign exchange swap, with a seven-day maturity, to provide Swiss franc liquidity against euro. This operation attracted bids for €585 million, and since this was well below the intended amount of €25 billion, all bids were allotted in full at a fixed price of – 0.38 swap points. On Tuesday, 26 January, the ECB announced a standard Longer-Term Refinancing Operation (LTRO) with a maturity of 91 days. In this LTRO, the ECB received bids for €3.27 billion, which amount was allotted in full at a fixed rate equivalent to the prevailing main refinancing rate of 1.00 per cent.
In a press release dated 27 January, the Governing Council of the ECB announced that, in agreement with the US Federal Reserve, the Bank of England, the Bank of Japan and the SNB, it had decided to stop conducting US dollar liquidity-providing operations after 31 January 2010. In the light of this decision, the ECB also confirmed that its temporary liquidity swap lines with the Federal Reserve would expire on 1 February 2010. It said that, given the improvements in the functioning of financial markets over the past year, these arrangements, which had been established to counter pressures in global funding markets, were no longer needed. However, central banks would continue to cooperate amongst themselves as and when the need arose. Thus, on Wednesday 27 January, the ECB, in conjunction with the US Federal Reserve, conducted its last seven-day US dollar funding operation through collateralised lending. This operation, which was conducted at a fixed rate of 1.13 per cent, attracted no bids.

Domestic Treasury Bill Market
In the domestic primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on 30 April 2010. Bids for €128.91 million were submitted, with the Treasury allotting €20 million. Since €6.10 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by €13.91 million to €465.01 million.
The yield resulting from the auction was 1.204%, i.e. 6.7 basis points less than that on bills with a similar tenor issued on 22 January 2010. The latest yield represented a bid price of 99.6966 per 100 nominal. This week the Treasury will invite tenders for 182-day bills maturing on 6 August 2010. Treasury bill trading on the Malta Stock Exchange amounted to €1.37 million during the week, with €0.04 million trades being conducted by the Central Bank of Malta in its role as market maker. Concurrently off-exchange transactions amounted to €3.41 million, with €2.14 million trades being transacted by the Central Bank of Malta.



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03 February 2010


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