MSE | Wednesday, 27 January 2010

Money Market Report for the week ended January 22

ECB to discontinue Swiss franc liquidity-providing operations

On Monday, January 18, the ECB announced its weekly Main Refinancing Operation (MRO). This auction, which was conducted on Tuesday, attracted bids for €58 billion from euro area eligible counterparties, €2.1 billion less than the amount bid for in the previous week.
Also on Monday, January 18, the Eurosystem and the Swiss National Bank (SNB) conducted a EUR/CHF foreign exchange swap, with a seven-day maturity, to provide Swiss franc liquidity against euro. This operation attracted bids for €587 million, and since this was well below the intended amount of €25 billion, all bids were allotted in full at a fixed price of -0.44 swap points. In the light of the declining demand and improving conditions in funding markets, the Governing Council of the European Central Bank, in agreement with the SNB, decided to discontinue conducting one week Swiss franc liquidity-providing operations after 31 January 2010. This decision was announced through a press release dated 18 January 2010.
Meanwhile, on Tuesday, January 19, the ECB conducted a Special Term Refinancing Operation (STRO) with a maturity of 21 days. This attracted bids for €5.7 billion.
On the same day, it being the end of the reserve deposit maintenance period, the ECB also conducted an overnight Fine-tuning Liquidity Absorbing operation. This was carried out at a variable rate, with counterparties allowed to place bids at a maximum of 1.00 per cent. The operation attracted bids for €259 billion, of which the ECB accepted €258.9 billion, or 99.96 per cent of the total amount bid for. The marginal rate on this operation was set at 0.80 per cent, while the weighted average rate was 0.75 per cent.
On Wednesday, January 20, the ECB, in conjunction with the US Federal Reserve, conducted a seven-day US dollar funding operation through collateralised lending. This attracted bids for $75 million, which amount was allotted in full at a fixed rate of 1.13 per cent.
The amounts bid for in all the ECB’s euro refinancing operations (except for the Fine-tuning operation) were 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.

Domestic Treasury Bill Market

In the domestic primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on April 23, 2010. Bids for €101.10 million were submitted, with the Treasury accepting €25 million. Since €21.58 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by €3.42 million to €451.10 million.
The yield resulting from the auction was 1.271 per cent, i.e. 2.9 basis points lower than that on bills with a similar tenor issued on 15 January 2010. The latest yield represented a bid price of 99.6797 per 100 nominal.
On Tuesday, the Treasury invited tenders for 91-day bills maturing on April 30, 2010.
Treasury bill trading on the Malta Stock Exchange amounted to only €11,000 during the week, with all trades being conducted by the Central Bank of Malta in its role as market maker.



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27 January 2010


Malta Today


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