ECB keeps rate unchanged, announces phasing out of non-standard operations
On Monday, March 1, the ECB announced its weekly Main Refinancing Operation (MRO). This auction, which was conducted on Tuesday, attracted bids for €80.46 billion from euro area eligible counterparties, which 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.
On Thursday, March 4, the Governing Council of the ECB decided to keep the interest rate on its MROs unchanged at 1.00 per cent. Interest rates on the marginal lending facility and the deposit facility were also left unchanged, at 1.75 per cent and 0.25 per cent, respectively.
On the same day, in view of economic and financial market developments, the ECB Governing Council decided to continue the gradual phasing out of its non-standard operational measures.
Specifically, the Governing Council decided to continue conducting its MROs as fixed rate tender procedures with full allotment for as long as necessary, and at least until the end of this year’s ninth maintenance period on October 12, 2010. This tender procedure will also remain in use for the Governing Council’s special-term refinancing operations with a maturity of one maintenance period, which will continue to be conducted for as long as needed and at least until October 12, 2010. The fixed rate in these special-term refinancing operations will be the same as the rate used in the respective MRO.
The Governing Council also decided to return to variable rate tender procedures in the regular 3-month longer-term refinancing operations (LTROs), starting with the operation to be allotted on April 28, 2010. Allotment amounts in these operations will be set with the aim of ensuring smooth conditions in money markets and avoiding any significant spreads between bid rates and the prevailing MRO rate. An indicative allotment amount will be pre-announced for each of the 3-month LTROs at the start of the maintenance period in which the operation is to be conducted. The MRO rate will be used as the minimum bid rate in the 3-month LTROs. This is a technical and transitional measure to avoid allotment rates below the prevailing MRO rate in the presence of ample liquidity.
In order to smooth out the liquidity effect of the exceptionally large 12-month LTRO maturing on July 1, 2010, the Governing Council decided to carry out an additional six-day fine-tuning operation with announcement, allotment and settlement on July 1 and maturity on July 7, the latter date coinciding with the settlement day of the next MRO. The fixed rate tender procedure with full allotment will also be used in this operation, with the rate being the same as the prevailing MRO rate.
Furthermore, the Governing Council also decided, in line with its decision on the 12-month LTRO of December 16, 2009, to fix the rate on the 6-month LTRO to be allotted on March 31, 2010, at the average minimum bid rate of the MROs over the life of this operation.
Domestic Treasury Bill Market In the domestic primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on June 4, 2010. Bids for €150.31 million were submitted, with the Treasury allotting €33.95 million. Since €33.99 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased marginally by €0.04 million to €488.66 million.
The yield resulting from the auction fell to a new low of 0.99%, i.e. 5.3 basis points less than that on bills with a similar tenor issued on February 19, 2010. The latest yield represented a bid price of 99.7504 per 100 nominal.
No secondary market trading in treasury bills was recorded on the Malta Stock Exchange during the week.
On Tuesday, the Treasury invited tenders for 91-day bills maturing on June 11, 2010.
