FRANKFURT (MNI) – The European Central Bank Tuesday drained E59
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 eighth
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 compares with E31.87 billion drained last week,
below the bank’s desired amount of E55 billion. This week’s targeted
total means that an additional E4 billion worth of bonds were purchased
and settled in the last week.
Last week, concerns about liquidity ahead of the redemption of the
ECB’s 1-year liquidity-providing operation motivated banks to hoard
their cash, rather than hand it over to the ECB, experts reckoned.
Eighty-eight banks placed bids totaling E87.431 billion today, or
1.5 times the desired drainage amount. This compares to a ratio of 1.4
at the bank’s last oversubscribed operation, two weeks ago.
The weighted average allotment rate for today’s operation was 0.56%
as compared to 0.54% in last week’s operation, the ECB said. The lowest
rate was 0.29% and the highest rate accepted, or the marginal rate, was
0.75%.
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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