labels: economy - general, banks & institutions, stock markets - world
European Central Bank injects $65.3 billion more into the banking system news
13 August 2007

Mumbai: The European Central Bank (ECB) injected an additional $65.3 billion ($92 billion / approximately Rs375,017.9 crore) into the European banking system to soothe nervous markets, even as European shares rebounded with declining global worries about US mortgages.

The ECB's €47.67-billion tender was smaller than the two in the previous week - €95 billion ($130 billion) and €61 billion ($83.6 billion).

The ECB, the US Federal Reserve and other central banks injected $154 billion into money markets on 9 August and $135.7 billion on 10 August amidst fears that US subprime mortgage losses would slow lending.

"The ECB notes that money market conditions are normalising and that the supply of aggregate liquidity is ample," the ECB said. "With this fine-tuning operation, the ECB is further supporting the normalisation of conditions in the money market."

Similar cash infusions were made in the United States, Asia and Australia. Japan's central bank also put ¥600 billion ($5 billion) into its money markets.

The overnight rate at which banks lend euros to each other fell to as low as 3.95 per cent from 4.16 per cent earlier in the day. It spiked to 4.62 per cent on 9 August, a six-year high. The ECB's benchmark refinancing rate is 4 per cent.

The euro fell to $1.3661 at 3:30 p.m. in Frankfurt from $1.3697 before the ECB's first announcement this morning. European bonds declined, snapping a two-day rally, as the risk of owning corporate bonds fell and stocks rebounded, amidst losing appetite for safety.

The yield on the 10-year German bund, Europe's benchmark, rose 3 basis points to 4.37 per cent at noon in London.


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European Central Bank injects $65.3 billion more into the banking system