ECB decisions
On July 16, the Governing Council of the European Central Bank decided that the interest rate on the main refinancing operations (MRO) and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00, 0.25 and -0.50 per cent respectively.
The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, two per cent within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.
The Governing Council will continue its purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of €1,350 billion. These purchases contribute to easing the overall monetary policy stance, thereby helping to offset the pandemic-related downward shift in the projected path of inflation.
The purchases will continue to be conducted in a flexible manner over time, across asset classes and among jurisdictions. This allows the Governing Council to effectively stave off risks to the smooth transmission of monetary policy.
The Governing Council will conduct net asset purchases under the PEPP until at least the end of June 2021 and, in any case, until it judges that the coronavirus crisis phase is over. The Governing Council will reinvest the principal payments from maturing securities purchased under the PEPP until at least the end of 2022. In any case, the future roll-off of the PEPP portfolio will be managed to avoid interference with the appropriate monetary policy stance.
Net purchases under the asset purchase programme (APP) will continue at a monthly pace of €20 billion, together with the purchases under the additional €120 billion temporary envelope until the end of the year.
The Governing Council continues to expect monthly net asset purchases under the APP to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates. The council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it starts raising the key ECB interest rates and, in any case, for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.
The Governing Council will also continue to provide ample liquidity through its refinancing operations. In particular, the latest operation in the third series of targeted longer-term refinancing operations has registered a very high take-up of funds, supporting bank lending to firms and households.
The council continues to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry.
ECB monetary operations
On July 13, the ECB announced a seven-day MRO. The operation was conducted on July 14 and attracted bids from euro area eligible counterparties of €1.03 billion, €0.06 billion less than the bid amount of the previous week. The amount was allotted in full at a fixed rate equivalent to the prevailing MRO rate of zero per cent, in accordance with current ECB policy.
On July 15, the ECB conducted an 84-day US dollar funding operation through collateralised lending in conjunction with the US Federal Reserve. This operation attracted bids of $0.21 billion, which was allotted in full at a fixed rate of 0.32 per cent.
During the week under review, the ECB conducted three seven-day US dollar funding operations through collateralised lending in conjunction with the US Federal Reserve. These operations attracted total bids of $1.41 billion, at the rates of 0.33 and 0.34 per cent.
Domestic Treasurybill market
In the domestic primary market for Treasury bills, the Treasury invited tenders for 182-day bills and 273-day bills for settlement value July 16, maturing on January 14, and April 15, 2021, respectively.
Bids of €125 million were submitted for the 182-day bills, with the Treasury accepting €15 million, while bids of €120 million were submitted for the 273-day bills, with the Treasury accepting €2 million. Since €30 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by €13 million, standing at €804 million.
The yield from the 182-day bill auction was -0.450 per cent, a decrease of 1.0 basis point from bids with a similar tenor issued on July 9, representing a bid price of €100.2280 per €100 nominal. The yield from the 273-day bill auction was -0.455 per cent, a decrease of 24 basis points from bids with a similar tenor issued on May 28, representing a bid price of €100.3462 per €100 nominal.
During the week under review, there was no trading on the Malta Stock Exchange.
Today, the Treasury will invite tenders for 91-day bills and 182-day bills maturing on October 22, 2020 and January 21, 2021, respectively.