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ECB Drains E35 Bln In 1-Week Term Deposit Tender, As Intended
By Market News International || June 1, 2010 at 11:45 GMT
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FRANKFURT (MNI) – The European Central Bank on Tuesday drained E35
billion from the banking system in a one-week liquidity absorbing
operation intended to sterilize the ECB’s purchases of Eurozone
government bonds.
The amount drained matched the total volume of government bonds
purchased by the ECB and settled as of last Friday. It was the third
consecutive weekly term deposit tender since the ECB announced last
month that it would buy bonds to shore up sovereign debt markets.
The E35 billion figure is the cumulated total of bonds purchased
and settled since the ECB program began on May 10. It compares with
E26.5 billion in the previous tender, meaning that an additional E8.5
billion worth of bonds were purchased and settled in the last week. That
was down from E10 billion in new purchases and settlements in the
previous week and E16.5 billion in the first week of the program.
Sixty-Eight banks placed bids totaling E73.576 billion, or 2.1
times more than the actual amount accepted by the ECB. The previous
week’s operation was over-subscribed by 3.25 times — with just E86
billion worth of bids and E26.5 billion accepted. Both of those figures
are down sharply from the first term tender operation on May 18, when
there were over E162 billion worth of bids for a draining operation
totaling E16.5 billion.
The weighted average allotment rate for today’s operation was 0.28%
as compared to 0.27% in last week’s operation, the ECB said. The lowest
rate was 0.26% and the highest rate accepted was 0.28% — the same as
the weighted average.
The drained liquidity takes the form of fixed-term deposits. These
can be used as collateral in the Eurosystem’s refinancing operations.
There will be another liquidity draining operation next week, the
bank said Monday.
