Central Bank Monetary Operations
On Friday, 11 August, the Central Bank of Malta conducted a seven-day term deposit auction, absorbing a total of Lm132.2 million from the banking system, Lm20.5 million less than the Lm152.7 million that matured on the same day. The rate resulting from the auction was 3.45 per cent, being the floor of the interest rate band (3.45 per cent-3.50 per cent) at which the bank is currently conducting its term deposit auctions. The net injection of funds was in response to a further decrease in liquidity in the banking system.
Credit institutions started the week under review with a shortfall in their statutory reserve deposit accounts with the bank. In addition, there was a Lm10 million net issue of new Treasury bills which was taken up by credit and financial institutions and a negative net clearing of cheques amounting to Lm1.3 million. Partly offsetting these factors were direct credits amounting to Lm14.3 million, mainly related to Government salaries.
Interbank market
Turnover in the interbank market rose to Lm6 million during the week, from Lm3.7 million in the previous week. Five deals were conducted in the overnight tenor at a weighted average interest rate of 3.38 per cent, up by 15 basis points from the comparable rate of the previous week. Two other deals were struck in the one-week tenor at a weighted average rate of 3.41 per cent, down by two basis points from the rate on a similar deal transacted the previous week.
Treasury bill market
In the primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on 10 November 2006 and 182-day bills maturing on 9 February 2007. From the Lm16.9 million worth of bids submitted for the three-month bill, Lm10.9 million were accepted by the Treasury, while from the Lm12.5 million worth of bids submitted for the six-month tenor, the whole amount was accepted.
Given that Lm14.4 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by Lm9 million to Lm143.7 million.
The latest three-month rate resulting from the week’s Treasury bill auction was 3.6945 per cent. This was 8.6 basis points higher than the rate on 91-day bills issued the previous week and reflected a bid price of Lm99.0873 per Lm100 nominal. The latest rate for the six-month tenor was 4.0227 per cent, which was 75.8 basis points higher than the previous rate on six-month bills – those issued on 12 May 2006 – and reflected a bid price of Lm98.0336 per Lm100 nominal. This was the first auction for 182-day bills since the rate hike by the bank on 25 May.
Turnover in the secondary market for Treasury bills fell to Lm0.7 million during the week, from Lm1.1 million in the previous week. All trading was effected by the bank in its role of market-maker.
On Monday, the Treasury invited tenders for 91-day bills maturing on 17 November 2006. In the following week the Treasury will accept bids for bills in the 273-day tenor to be issued on 25 August 2006 and maturing on 25 May 2007.