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Deposits at ECB hit 2-mth high, bond buys continue

Source: Reuters - Thu 8th Oct 2009

The amount of cash deposited by banks at the European Central Bank rose, data showed on Thursday, as markets await the ECB's rate decision due at 1145 GMT.

The ECB's 60 billion euro covered bond buying programme also continued to make progress. The total value of bonds purchased to-date reached 16.958 billion euros, up from 16.492 billion euros.

The ECB said commercial banks deposited 171.524 billion euros at the ECB overnight, compared to 167.192 billion theprevious day.

The amount is the highest since Aug. 10. The deposits have risen since banks received 75 billion euros of one-year ECB funds last week.

The amounts parked at the ECB's deposit facility have been high since it flooded money markets with almost half a trillion euros at the end of June in the first of three planned injections of one-year funds.

However, the amounts parked at the ECB are around half the level deposited by banks in the aftermath of the ECB's first one-year tender in June when it flooded markets with a record 442 billion euros.

The amount banks borrowed from the ECB's overnight account fell to 96 million euros from 816 million euros previously, the ECB added.

The ECB and the 16 euro zone national central banks are buying euro-denominated covered bonds - debt backed by a pool of assets such as mortgage loans that remain on the issuing bank's balance sheet - over the next year, from both primary and secondary markets.

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