Money Mar­ket Re­port for the week end­ing 26 Oc­to­ber

The Malta Business Weekly - - MARKETS -

ECB De­ci­sions

On 25 Oc­to­ber, the Gov­ern­ing Coun­cil of the Euro­pean Cen­tral Bank de­cided that the in­ter­est rate on the main re­fi­nanc­ing op­er­a­tions and the in­ter­est rates on the mar­ginal lend­ing fa­cil­ity and the de­posit fa­cil­ity will re­main un­changed at 0.00%, 0.25% and - 0.40% re­spec­tively. The Gov­ern­ing Coun­cil ex­pects the key ECB in­ter­est rates to re­main at their present lev­els at least through the sum­mer of 2019, and in any case for as long as nec­es­sary to en­sure the con­tin­ued sus­tained con­ver­gence of in­fla­tion to lev­els that are be­low, but close to, 2% over the medium term.

Re­gard­ing non-stan­dard mon­e­tary pol­icy mea­sures, the Gov­ern­ing Coun­cil will con­tinue to make net pur­chases un­der the as­set pur­chase pro­gramme (APP) at the new monthly pace of €15bn un­til the end of De­cem­ber. The Gov­ern­ing Coun­cil an­tic­i­pates that, sub­ject to in­com­ing data con­firm­ing the medium-term in­fla­tion out­look, net pur­chases will then end. The Gov­ern­ing Coun­cil in­tends to rein­vest the prin­ci­pal pay­ments from ma­tur­ing se­cu­ri­ties pur- chased un­der the APP for an ex­tended pe­riod of time af­ter the end of the net as­set pur­chases, and in any case for as long as nec­es­sary to main­tain favourable liq­uid­ity con­di­tions and an am­ple de­gree of mon­e­tary ac­com­mo­da­tion.

ECB Mon­e­tary Op­er­a­tions

On 22 Oc­to­ber the ECB an­nounced its weekly MRO. The op­er­a­tion was con­ducted on 23 Oc­to­ber and at­tracted bids from euro area el­i­gi­ble coun­ter­par­ties of €7.68bn, €0.18bn lower 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 0.00%, in ac­cor­dance with cur­rent ECB pol­icy.

On 24 Oc­to­ber the ECB con­ducted a seven-day US dol­lar fund­ing op­er­a­tion through col­lat­er­alised lend­ing in con­junc­tion with the US Fed­eral Re­serve. This op­er­a­tion at­tracted bids of $0.08bn, which was al­lot­ted in full at a fixed rate of 2.70%.

Do­mes­tic Trea­sury Bill Mar­ket

In the do­mes­tic pri­mary mar­ket for Trea­sury bills, the Trea­sury in­vited ten­ders for 28- and 182day bills for set­tle­ment value 25 Oc­to­ber, ma­tur­ing on 22 No­vem­ber and 25 April 2019, re­spec­tively. Bids of €42m were sub­mit­ted for the 28-day bills, with the Trea­sury ac­cept­ing €11m, while bids of €45m were sub­mit­ted for the 182-day bills, with the Trea­sury ac­cept­ing €20m. Since €31m worth of bills ma­tured dur­ing the week, the out­stand­ing balance of Trea­sury bills re­mained un­changed at €300m.

The yield from the 28-day bill auc­tion was -0.354%, up by 0.1 ba­sis point from bids with a sim­i­lar tenor is­sued on 18 Oc­to­ber, rep­re­sent­ing a bid price of €100.0275 per €100 nom­i­nal. The yield from the 182-day bill auc­tion was -0.355%, a de­crease of 0.6 ba­sis point from bids with a sim­i­lar tenor is­sued on 4 Oc­to­ber, rep­re­sent­ing a bid price of €100.1798 per €100 nom­i­nal.

Dur­ing the week un­der re­view, there was no trad­ing on the Malta Stock Ex­change.

This week the Trea­sury will in­vite ten­ders for 28-day bills and 182-day bills ma­tur­ing on 29 No­vem­ber and 2 May 2019, re­spec­tively.

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