Money Market Report for the week ending 21 August
ECB Decisions
In view of continuing improvements in US dollar funding conditions and the low demand at recent seven-day maturity US dollar liquidity-providing operations, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank, in consultation with the Federal Reserve, have jointly decided to further reduce the frequency of their seven-day operations from three times per week to once per week. This operational change will be effective as of 1 September. At the same time, these central banks will continue to hold weekly operations with an 84-day maturity.
These central banks stand ready to re-adjust the provision of US dollar liquidity as warranted by market conditions. The swap lines among these central banks are available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses, both domestically and abroad.
ECB Monetary Operations
On 17 August, the ECB announced a seven-day Main Refinancing Operation. The operation was conducted on 18 August and attracted bids from euro area eligible counterparties of €1.33bn, €0.33bn more 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 19 August, the ECB conducted an 84day US dollar funding operation through collateralised lending in conjunction with the US Federal Reserve. This operation attracted bids of $0.24bn, which was allotted in full at a fixed rate of 0.33%.
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 $0.04bn, at the rate of 0.34%.
Domestic Treasury Bill Market
In the domestic primary market for Treasury bills, the Treasury invited tenders for 91-day bills and 182-day bills for settlement value 20 August, maturing on 19 November and 18 February 2021, respectively. Bids of €99m were submitted for the 91-day bills, with the Treasury accepting €22m, while bids of €101m were submitted for the 182day bills, with the Treasury accepting €10m. Since €40m worth of bills matured during the week, the outstanding balance of Treasury bills decreased by €8m to stand at €804m.
The yield from the 91-day bill auction was -0.480%, an increase of 0.4 basis point from bids with a similar tenor issued on 13 August, representing a bid price of €100.1215 per €100 nominal. The yield from the 182-day bill auction was -0.479%, a decrease of 2.0 basis points from bids with a similar tenor also issued on 30 July, representing a bid price of €100.2427 per €100 nominal.
During the week under review, there was no trading on the Malta Stock Exchange.
On Tuesday the Treasury invited tenders for 91-day bills and 273-day bills maturing on 26 November and 27 May 2021, respectively.