Further decrease in 91-day Treasury Bill rate

On August 23, the ECB announced its weekly MRO. The auction was conducted on August 24, and attracted bids from euro area eligible counterparties of €150.32 billion, €4.91 billion more than the amount bid for the previous week.

The bid amount was allotted in full at a fixed rate equivalent to the prevailing main refinancing rate of one per cent, in accordance with current ECB policy.

On Tuesday, August 24, the ECB also conducted an auction for a seven-day, fixed-term deposit intended to absorb €60.5 billion. The operation was designed to sterilise the effect of purchases made under the Securities Market Programme and settled by the previous Friday (August 20). The auction was carried out at a variable rate with euro area eligible counterparties, which were allowed to place up to two bids at a maximum rate of one per cent. It attracted bids amounting to €108.4 billion. The ECB allotted the full intended volume of €60.5 billion, or 55.81 per cent of the total amount bid for.

The marginal rate on the auction was set at 0.37 per cent, with the weighted average rate standing at 0.35 per cent.

On August 25, the ECB conducted a standard Longer-Term Refinancing Operation (LTRO) with a maturity of 91 days. This operation attracted bids for €19.08 billion, which amount was allotted in full at a fixed rate equivalent to the prevailing main refinancing rate of one per cent in accordance with current ECB policy.

On Wednesday, August 25, the ECB conducted a seven-day US dollar funding operation through collateralised lending in conjunction with the US Federal Reserve. This attracted bids for $0.04 billion, which was allotted in full at a fixed rate of 1.18 per cent.

Meanwhile, in the domestic primary market for Treasury Bills, the Treasury invited tenders for 91-day bills maturing on November 26, 2010. Bids of €111.87 million were submitted, with the Treasury accepting just €4 million. Since €2.7 million worth of bills matured during the week, the outstanding balance of Treasury Bills increased by €1.3 million, to stand at €515.58 million. The yield from the 91-day bill auction was 0.75 per cent, i.e. 10 basis points lower than on bills with a similar tenor issued on August 20. The yield on these bills represented a bid price of 99.8108 per 100 nominal.

During the week, off-exchange transactions amounting to €6 million were transacted by the Central Bank of Malta.

This week the Treasury will invite tenders for 28-day bills maturing on October 1 and 91-day bills maturing on December 3.