Money Market Report for the week ended 3 April 2009
European Central Bank reduces Minimum Bid Rate by 25 basis points to 1.25%
ECB Monetary Operations
On Thursday, 2 April, the Governing Council of the European Central Bank (ECB) reduced the minimum bid rate on its main refinancing operations by 25 basis points to 1.25% with effect from 8 April 2009, the settlement date for this week’s Main Refinancing Operation (MRO). Accordingly, with effect from the same date, the ECB also reduced the rate on the marginal lending facility by 25 basis points to 2.25% and the rate on the overnight deposit facility by the same amount to 0.25%. This left the corridor applicable to the ECB’s standing facilities at 200 basis points around the interest rate on the MRO.
On Monday, 30 March, the ECB announced its weekly MRO. This attracted bids for €238.07 billion from euro area eligible counterparties, which amount was allotted in full at a fixed rate equivalent to the prevailing main refinancing rate of 1.50%.
On the same day, the Eurosystem and the Swiss National Bank (SNB) conducted a EUR/CHF foreign exchange swap, with a 7-day maturity, to provide Swiss franc liquidity against euro. This operation attracted bids for €49.72 billion. As this exceeded the intended volume of €25 billion, participating counterparties received 50.28% of the amounts bid for. This operation was conducted at a fixed price of -3.36 swap points.
On Wednesday, 1 April, the ECB, in conjunction with the US Federal Reserve, conducted another US dollar funding operation, this time for a tenor of 7-days. This attracted bids for $93.08 billion, which amount was again allotted in full at a fixed rate of 1.21%.
Domestic Treasury Bill Market
In the domestic primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on 3 July 2009 and 182-day bills maturing on 2 October 2009. Bids for €83.12 million were submitted for the 91-day bills, with the Treasury accepting € 51.15 million, while bids for €14.53 million were submitted for the 182-day bills, with the Treasury accepting €8.31 million. Since €42.20 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by €17.30 million to €559.90 million.
The yield resulting from the 91-day bill auction was 2.152%, 3.4 basis points lower than that on bills with a similar tenor issued on 20 March 2009. The latest yield on such bills represented a bid price of 99.4590 per 100 nominal. The yield resulting from the 182-day bill auction was 2.343%, that is, 3 basis points higher than that on bills with a similar tenor issued on 27 March 2009. The yield on these bills represented a bid price of 98.8293 per 100 nominal.
On Tuesday the Treasury invited tenders for 183-day bills maturing on 9 October 2009.
Treasury bill trading on the Malta Stock Exchange amounted to €2.78 million during the week, with all trades being conducted by the Central Bank of Malta in its role as market maker.