ECB makes 269-billion euro refi offer as market tensions persist
FRANKFURT (AFP) — The European Central Bank on Tuesday alloted 269 billion euros (371 billion dollars) in a refinancing operation to help banks meet their minimum reserve requirements over the next week.
In an intense day of activity, the ECB also moved to absorb 60 billion euros of money it had pumped into the market in recent weeks to avoid a credit crunch.
Both moves appeared to show that tensions persist on the markets, which have been rocked in recent weeks by the collapse of the US market for high-risk subprime home loans.
The ECB said the weighted average interest rate on accepted bids in the 269-billion-euro refinancing operation fell to 4.17 percent from 4.19 percent last week.
The marginal rate -- the lowest rate at which bids were accepted -- was 4.14 percent, compared with 4.15 percent last week. The ECB had set a minimum bid rate of 4.00 percent and the new refinancing operation expires on September 19.
The ECB also launched a quick tender to soak up 60 billion euros of money market liquidity in a "fine-tuning operation" and said all funds were taken up.
The quick tender was called to offset an expected liquidity imbalance in the money market on Tuesday, the final day of the current reserve maintenance period.
The ECB offered a fixed interest rate of 4.00 percent to banks tendering funds.
Central banks have pumped massive amounts of cash into money markets since August 9 following the deep difficulties in the subprime sector, so that commercial banks can continue to extend credit on which the global economy depends.
The ECB itself pumped in 42 billion euros into the market last Thursday in an attempt to calm tensions after institutional lenders tightened credit conditions following the subprime collapse.
