Central Bank Monetary Operations

On Thursday, 28 December 2006, following the monthly meeting with the Monetary Policy Advisory Council, the Governor of the Central Bank of Malta decided to leave the Bank’s Central Intervention Rate unchanged at 3.75 per cent (see www.centralbankmalta.com).

On Friday, 29 December 2006, the bank conducted a seven-day term deposit auction, absorbing a total of Lm106.7 million from the banking system. This was Lm8.2 million more than the Lm98.5 million that matured on the same day. The interest rate resulting from the auction was 3.7 per cent, being the floor of the band (3.7 per cent - 3.75 per cent) at which the bank is currently conducting its term deposit auctions.

The net absorption of funds was in response to an increase in liquidity in the banking system during the week under review. In fact, credit institutions started the week with an overall surplus in their statutory reserve deposit accounts with the bank, while liquidity was boosted further by the payment of Lm11.9 million in Government salaries and, to a lesser extent, by the sale of Treasury bills worth Lm1.5 million by credit institutions in the secondary market. These factors were partly offset by a negative net clearing of cheques of Lm17.2 million, mainly related to provisional income tax payments, the purchase of foreign currency against Maltese lira from the bank to the tune of Lm1.3 million and a similar increase in currency in circulation.

Interbank Market

There was no interbank market activity during the week.

Treasury Bill Market

In the primary market for Treasury bills, the Treasury invited tenders for 273-day bills maturing on 28 September 2007. From the Lm12 million worth of bids submitted, however, none were accepted by the Treasury, as the Government’s liquidity position remained strong. Since no Treasury bills matured during the week, the outstanding balance of Treasury bills remained unchanged at Lm160.5 million.

This week, the Treasury invited tenders for 90-day bills maturing on 5 April 2007. Next week, the Treasury will invite tenders for 91-day bills maturing on 13 April 2007.

In the secondary market for Treasury bills, trading rose from the previous week’s level of Lm0.8 million to Lm1.7 million. All deals were transacted with the bank in its role of market maker.

Malta Real-time Interbank Payment System (MaRIS) – December 2006

During the month of December 2006, 4,046 payment messages were processed through MaRIS, for a total value of Lm1,862.8 million. Of these, 1,976 were in respect of payments on behalf of customers for a value of Lm92.6 million and 2,070 were interbank payments totalling Lm1,770.2 million. The daily average volume for the month was 238 messages for a value of Lm109.6 million. The highest number of messages was processed on 12 December, with 295 messages, while the highest value was registered on 1 December, with Lm327 million.

Further details can be found on the Central Bank of Malta website: www.centralbankmalta.com