FRANKFURT (MNI) – The European Central Bank Tuesday drained E60.5
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 eleventh
consecutive weekly term deposit tender since the ECB announced in May
that it would buy bonds to shore up sovereign debt markets.
The drained amount is E500 million more than the bank drained last
week. The ECB explained Monday its purchases of new securities last week
totalled E176 million.
“As the settled SMP transactions last week were of a volume of E176
million, the rounded settled amount – and the intended amount for
absorption accordingly — increased to E60.5 billion,” the ECB explained
Monday.
This is the lowest purchase total since the program began in May
and adds further fuel to those who expect the program to enter dormancy,
if not be jettisoned, soon.
86 banks placed bids totaling E88.550 billion today, or about 1.5
times the desired drainage amount below last week’s 1.6.
The weighted average allotment rate for today’s operation was 0.55%
below last week’s 0.56%, the ECB said. The lowest rate was 0.37% and the
highest rate accepted, or the marginal rate, was 0.60%.
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
ECB said Monday.
–Frankfurt bureau; +49-69-720142; frankfurt@marketnews.com
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