NEWS | Wednesday, 16 July 2008

Money Market Report for the week ended 11 July 2008

ECB conducts three different auctions during the week

Eurosystem Monetary Operations
On Monday, 7 July, the European Central Bank (ECB) announced its weekly Main Refinancing Operation (MRO). This attracted bids for €263.6 billion from euro area eligible counterparties, with the ECB allotting €175 billion, or 66.4 per cent of the total amount bid for. The marginal rate on the operation, that is the rate at which the total tender allotment was exhausted, was set by the ECB at 4.32 per cent, 22 basis points higher than the marginal rate resulting from the MRO of the previous week. This substantial increase in the marginal rate, however, reflects the impact of the ECB’s 25 basis point rate hike effective from 9 July 2008.
On Tuesday, 8 July, the ECB launched a supplementary Longer-Term Refinancing Operation (LTRO) with a maturity of 182 days. This operation attracted bids for €74.58 billion from euro area eligible counterparties, with the ECB allotting €25 billion, or 33.52 per cent of the total amount bid for. The marginal rate resulting from this operation was 4.93 per cent, 38 basis points higher than the marginal rate resulting from the previous 6 month LTRO, that of 2 April 2008.
On the same day, the ECB also launched a liquidity-absorbing Fine-Tuning Operation. This attracted bids for €14.6 billion from euro area eligible counterparties, with the ECB allotting the total amount bid for. These deals were conducted at a fixed rate of 4 per cent

Domestic Treasury Bill Market
In the domestic primary market for Treasury bills, the Treasury invited tenders for 182-day bills maturing on 9 January 2009. Bids for €26.93 million were submitted, with the Treasury accepting €22.86 million. Since €11.1 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by €11.8 million to €435.14 million.
The yield resulting from the auction was 5.076 per cent, 3.2 basis points higher than that on bills with a similar tenor issued on 20 June 2008. The latest yield represented a bid price of 97.498 per 100 nominal.
On Tuesday the Treasury invited tenders for 91-day bills maturing on 17 October 2008, and the following week it will again invite tenders for 91-day bills, maturing on 24 October 2008.
Treasury bill trading on the Malta Stock Exchange amounted to €9.4 million, while off-Exchange transactions amounted to €457,000. All trades were conducted by the Central Bank of Malta in its role as market maker.