Eurosystem Monetary Operations

On Monday, 14 January, the European Central Bank (ECB) announced the weekly Main Refinancing Operation (MRO), through which the Eurosystem injects liquidity with a standard maturity of seven days into the euro zone money market. This liquidity providing operation attracted bids for e242 billion from euro zone eligible counterparties, with the ECB allotting e190.5 billion, or 78.7 per cent of the total amount bid for.

The marginal rate, which is the rate at which the total tender allotment is exhausted, was set by the ECB at 4.16 per cent. One domestic counterparty participated successfully in this operation.

On Tuesday, 15 January, the ECB also announced a fine tuning operation for a volume of e20 billion, with a view to seeking that money market overnight rates were aligned closer to the ECB’s policy rate of four per cent.

This liquidity absorbing operation (which took the form of an overnight deposit) was conducted at a fixed rate of four per cent. Bids from euro zone eligible counterparties amounted to e45.7 billion with the percentage of allotment at the fixed rate being 43.7522 per cent. In this operation, two domestic counterparties bid successfully.

Domestic Treasury Bill Market

In the domestic primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on 18 April 2008. Out of e76 million worth of bids submitted, the Treasury only accepted bids for e2 million. As e12.7 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by e10.7 million to e317.7 million.

The latest 91-day yield resulting from the auction was 4.1875%, down by 16.5 basis points from the 4.352% registered on similar bills issued on 30 November 2007. This represented a bid price of 98.9526 per 100 nominal. It should be pointed out, however, that the deal struck on the 30 November 2007 took place prior to the latest 25 basis point cut in official rates, which the Central Bank of Malta (CBM) had effected on 28 December 2007 in order to complete the process of convergence of official interest rates in Malta with those of the euro area.

Today the Treasury will invite tenders for 91-day bills maturing on 25 April 2008.

Treasury bill trading on the Malta Stock Exchange amounted to e1.7 million during the week reviewed, while off-Exchange transactions amounted to e302,938. All transactions were conducted by the CBM in its role as market maker.