Central Bank monetary operations

On Friday, 5 January, the bank conducted a seven-day term deposit auction absorbing Lm107.3 million from the banking system. This was Lm0.6 million more than the Lm106.7 million that matured on the same day. The interest rate resulting from the auction was 3.7 per cent, which is the floor of the band at which the bank is currently conducting its term deposit auctions.

The net absorption of funds was in response to a further slight increase in liquidity in the banking system during the week under review. Credit institutions started the week with a surplus in their statutory reserve deposit accounts with the bank, while net maturing Treasury bills worth Lm8 million, Government payments of Lm4.6 million (mainly related to retirement pensions) and a Lm3.6 million contraction in currency in circulation further boosted liquidity. Largely offsetting these factors was a negative net clearing of cheques of Lm11.6 million and purchases of foreign currency against the Maltese lira worth Lm7 million.

Interbank market

Once again, no interbank deals were reported in the week under review.

Treasury Bill market

In the primary market for Treasury bills, the Treasury invited tenders for 90-day bills maturing on 5 April 2007. However, out of the Lm25.2 million worth of bids submitted, none were accepted by the Treasury. This, once again, reflected the Government’s strong liquidity position. Since Lm8.4 million worth of bills matured during the week, the outstanding balance of Treasury bills now stands at Lm152.1 million, down from the previous week’s level of Lm160.5 million.

On Tuesday, the Treasury invited tenders for 91-day bills maturing on 13 April 2007, while next week the Treasury will invite tenders for 91-day bills maturing on 20 April 2007.

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