MSE | Wednesday, 26 March 2008

ECB conducts liquidity providing fine-tuning operation

Eurosystem Monetary Operations

On Monday, 17 March, 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 €295.7 billion from euro area eligible counterparties, with the ECB allotting €202 billion, or 68.3% 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 4.16%, four basis points higher than that of the previous week.
On Thursday, 20 March, the ECB also announced a liquidity-providing fine-tuning operation through which it was prepared to inject funds on an overnight basis. This operation attracted bids for €65.8 billion from euro area eligible counterparties, with the ECB allotting €15 billion, or 22.8% of the total amount bid for. The marginal rate was set by the ECB at 4.13%. The previous ECB fine-tuning operation, held on 11 March 2008, had been a liquidity-injecting operation which also resulted in a marginal rate of 4.13%.

Domestic Treasury Bill Market
In the domestic primary market for Treasury bills, the Treasury invited tenders for 183-day bills maturing on 19 September 2008. Out of the €15.9 million worth of bids submitted, the Treasury accepted bids for €9.9 million, or 62% of the total. At the same time €22.3 million worth of bills matured during the week, reducing the outstanding balance of Treasury bills to €347.6 million.
The yield resulting from the auction was 4.330%, 2.3 basis points higher than that on bills with a similar tenor issued on 29 February 2008. The latest yield represented a bid price of 97.8463 per 100 nominal.
On Tuesday the Treasury will invite tenders for 91-day bills maturing on 27 June 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.