ECB Adds a Further $83.6 Billion in Liquidity
The European Central Bank made a second move to boost liquidity in the financial market Friday, putting 61.05 billion ($83.6 billion) into the euro money markets, having already injected 94.8 billion euros Thursday.
The central bank set a tender for 3-day variable-rate securities Friday morning, and said accepted 100% of bids at a marginal rate of 4.05% and higher. The average weighted rate of the securities was 4.08%.
Sixty-two banks bid a total of 110.035 billion euros ($150.62 billion), compared to 49 banks which bid on Thursday at a rate of 4%, Reuters reported.
"The liquidity-providing fine-tuning operation follows up on the operation conducted yesterday and aims to assure orderly conditions in the euro money market," the ECB said on its official Web site.
The start date for the securities is Aug. 10 and they expire on Aug. 13. The 94.8 billion euros of securities issued by the ECB on Thursday mature on Friday, the central bank said.
The unprecedented move to ease lending from the governing council comes during an interest-rate tightening cycle for the European Union.
"There is a credit shortage ... what you have to do is cut interest rates," Roger Nightingale, economist at Millennium Global Investments, told CNBC.com, adding that the ECB and Fed "raised rates too late in the period of growth."
The seizing up of corporate credit "has to be psychological," as "money supply is high and growing rapidly … there should be loads of liquidity out there," Nightingale added.