Money market report for the week ended June 17

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ECB decisions

On June 15, the Governing Council of the European Central Bank (ECB) met to exchange views on the current market situation. Since the gradual process of policy normalisation was initiated in December 2021, the Governing Council has pledged to act against resurgent fragmentation risks.

The pandemic has left lasting vulnerabilities in the euro area economy which are indeed contributing to the uneven transmission of the normalisation of our monetary policy across jurisdictions.

Based on this assessment, the Governing Council decided that it will apply flexibility in reinvesting redemptions coming due in the pandemic emergency purchase programme (PEPP) portfolio, with a view to preserving the functioning of the monetary policy transmission mechanism, a precondition for the ECB to be able to deliver on its price stability mandate.

In addition, the Governing Council decided to mandate the relevant Eurosystem Committees together with the ECB services,  to accelerate the completion of the design of a new anti-fragmentation instrument for consideration by the Governing Council.

ECB monetary operations

On June 13, the ECB announced the seven-day main refinancing operation (MRO). The operation was conducted on June 14 and attracted bids from euro area eligible counterparties of €669 million, €222 million more than 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 June 15, the ECB conducted the seven-day US dollar funding operation through collateralised lending in conjunction with the US Federal Reserve. This operation attracted bids of $190.50 million, which was allotted in full at a fixed rate of 1.80 per cent.

During the week under review, participants in the TLTRO-III operations 1 to 10 had the option of terminating or reducing their outstanding amount before maturity. Accordingly, on June 29, a total of €74,142.74 million will be repaid.

Domestic Treasury Bill Market

In the domestic primary market for Treasury bills, the Treasury invited tenders for 91-day and 182-day bills for settlement value June 16, maturing on September 15, and December 15, respectively. Bids of €32 million were

submitted for the 91-day with the Treasury accepting them all, while bids of €20 million were submitted for the 182-day bills, with the Treasury accepting €18 million. Since €55 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by €5 million, standing at €864.10 million.

The yield from the 91-day bill auction was -0.054 per cent, increasing by nine basis points from bids with a similar tenor issued on June 9, representing a bid price of €100.0137 per €100 nominal. The yield from the 182-day bill auction was 0.290 per cent, increasing by 40.6 basis points from bids with a similar tenor issued on June 2, representing a bid price of €99.8536 per €100 nominal.

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

Today, the Treasury will invite tenders for 182-day and 273-day bills maturing on December 22, 2022 and March 23, 2023, respectively.

The report was prepared by the Monetary Operations and Collateral Management Office of the Central Bank of Malta.

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