FRANKFURT (MNI) – The European Central Bank Tuesday drained E69.0
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 cumulative volume of
government bonds purchased and settled by the ECB since the start of its
bond buying program in May. That amount includes the E1.965 billion in
bond purchases made and settled last week, which was the highest weekly
total since the week that ended July 2.
According to traders, the ECB was again in the markets buying
“aggressively” on Thursday and Friday. The ECB specifically targeted
Portuguese and Irish bonds, buying in tranches of E100 million, up from
E25 million previously, traders said.
Since the purchases made last Thursday and Friday are still to show
up in this week’s figures, and with ECB President Jean-Claude Trichet
confirming that the program is “ongoing”, next week’s purchases could
well surpass the E1.965 billion figure reported yesterday.
Fifty-six banks placed bids totaling E98.3433 billion, the ECB
said.
The weighted average allotment rate for today’s operation was
0.65%, the lowest rate was 0.35%, and the highest rate accepted, or the
marginal rate, was 0.72%, the ECB reported.
The drained liquidity takes the form of fixed-term deposits. These
can be used as collateral in the Eurosystem’s refinancing operations.
The central bank will hold another liquidity-absorbing operation next
week to reabsorb this week’s term deposits when they expire, as well as
any additional amounts that might be injected into the financial system
in the event of new bond purchases.
— Frankfurt bureau; +49-69-720 142; email: frankfurt@marketnews.com —
[TOPICS: MGX$$$,M$$FX$,M$X$$$,M$G$$$,M$$EC$]
