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Bank deposits at ECB rise, bond buys inch higher

Source: Reuters - Wed 21st Oct 2009

The amount of cash deposited by banks at the European Central Bank rose, data showed on Wednesday, reinforcing the fact that banks continue to hoard cash at the central bank.

The ECB said commercial banks deposited 79.950 billion euros($119.7 billion) at the 16-country bloc's central bank overnight, compared with 75.512 billion previously.

A total of 86 million euros was borrowed by banks overnight,down from 429 million previously.

The ECB's 60 billion euro covered bond buying programme also continued to make progress. The total purchased reached 18.638 billion euros, up from 18.431 billion euros, leaving the ECB almost a third of the way through its plan.

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

It dumped a further 75 billion euros of one-year money into the system in the second installment at the beginning of the month.

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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