Money Market Report for the week ending 15 December

ECB Decisions

On 14 December, 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 -0.40%, respectively. The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.

Regarding non-standard monetary policy measures, the Governing Council confirms that from January 2018 it intends to continue to make net asset purchases under the asset purchase programme (APP), at a monthly pace of €30bn, until the end of September 2018, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the APP in terms of size and/or duration. The Eurosystem will reinvest the principal payments from maturing securities purchased under the APP for an extended period of time after the end of its net asset purchases, and in any case for as long as necessary. This will contribute both to favourable liquidity conditions and to an appropriate monetary policy stance.

ECB Monetary Operations

On 11 December, the ECB announced its weekly MRO. The operation was conducted on 12 December and attracted bids from euro area eligible counterparties of €1.92bn, €0.34bn 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 13 December, 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 $0.05bn, which was allotted in full at a fixed rate of 1.91%.

Domestic Treasury Bill Market

In the domestic primary market for Treasury bills, the Treasury invited tenders for 91- and 363-day bills for settlement value 14 December, maturing on 15 March and 12 December 2018, respectively. Bids of €20m were submitted for the 91-day bills, with the Treasury accepting €2.50m, while bids of €30m were submitted for the 363-day bills, with the Treasury accepting €2m. Since €12m worth of bills matured during the week, the outstanding balance of Treasury bills decreased by €7.50m, to stand at €190.40m.

The yield from the 91-day bill auction was -0.355%, up by 2.0 basis points from bids with a similar tenor issued on 7 December, representing a bid price of €100.0898 per €100 nominal. The yield from the 363-day bill auction was - 0.300%, down by 11.1 basis points from bids with a similar tenor issued on 13 July, representing a bid price of €100.3034 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 91-day bills maturing on 22 March 2018.