European Central Bank announces interest rate hike

On Thursday 7 April, the Governing Council of the European Central Bank (ECB) increased the rate on its Main Refinancing Operations (MRO) by 25 basis points to 1.25 per cent with effect from Wednesday 13 April the settlement date for this week’s Main Refinancing Operation.

With effect from the same date, the ECB also increased the rate on the marginal lending facility and on the overnight deposit facility by 25 basis points to two per cent and 0.50 per cent, respectively.

In this manner, the corridor applicable to the ECB’s standing facilities was maintained at 150 basis points around the interest rate on the MRO.

On Monday, April 4, the ECB announced its weekly MRO.  The auction was conducted on Tuesday 5 April , and attracted bids from euro area eligible counterparties of €84.53 billion, €15.91 billion lower than the amount bid for in the previous week.

The bid amount was allotted in full at a fixed rate equivalent to the prevailing main refinancing rate of one per cent, in accordance with current ECB policy.

On Tuesday, 5 April, the ECB conducted an auction for a seven-day fixed-term deposit intended to absorb €77 billion. 

The operation was designed to sterilise the effect of purchases made under the Securities Markets Programme and settled by the previous Friday, April 1. 

The auction was carried out at a variable rate, with euro area eligible counterparties allowed to place up to two bids at a maximum rate of one per cent.

It attracted bids amounting to €121.13 billion, with the ECB allotting €77 billion or 63.57 per cent of the total amount bid for.

The marginal rate on the auction was set at 0.64 per cent, with the weighted average rate at 0.59 per cent.

On Wednesday, 6 April, the ECB conducted a seven-day US dollar funding operation through collateralised lending in conjunction with the US Federal Reserve. 

This operation was carried out at a fixed rate of 1.13 per cent and once again no bids were placed by euro area eligible counterparties.

Domestic Treasury Bill Market

In the domestic primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on 8 July, 2011 and 182-day bills maturing on 7 October, 2011.

Bids of €48.35 million were submitted for the 91-day bills, with the Treasury accepting €15 million, and €49.49 million worth of bids were submitted for the 182-day bills, with the Treasury accepting €17.59 million.

Since €37.35 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by €4.77 million, to stand at €394.08 million.

The yield from the 91-day bill auction was 1.017 per cent, i.e. 3.3 basis points lower than on bills with a similar tenor issued on April 1, 2011, representing a bid price of 99.7436 per 100 nominal.

The yield from the 182-day bill auction was 1.351 per cent, i.e. 2.8 basis points lower than on bills with a similar tenor issued on March25, 2011, representing a bid price of 99.3216 per 100 nominal. 

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

On Tuesday, the Treasury invited tenders for 91-day bills maturing on 15 July , 2011 and 273-day bills maturing on 13 January, 2012.