Central Bank Monetary Operations
On Friday, 12 January, the Central Bank of Malta conducted a seven-day term deposit auction absorbing Lm122.8 million from the banking system. This was Lm15.5 million more than the Lm107.3 million that matured on the same day.
The interest rate that resulted from the auction was 3.7 per cent, which is the floor of the interest rate band at which the bank is currently conducting its term deposit auctions.
The net absorption of funds was in response to a further increase in liquidity in the banking system during the week. To begin with, credit institutions began the week with a surplus in their statutory reserve deposit accounts with the bank.
In addition, government direct credits (mainly related to payments of social security allowances and dividends) amounting to Lm7.3 million, net maturing Treasury bills worth Lm5.7 million, a Lm4.8 million contraction in currency in circulation and a positive net clearing of cheques of Lm3.6 million, boosted liquidity further. Partly offsetting these factors was the purchase of Lm4.8 million worth of foreign currency against the Maltese lira by credit institutions.
Interbank Market
For the fourth consecutive week, no interbank deals were reported during the week under review.
Treasury Bill Market
In the primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on 13 April. Only Lm1.4 million of the Lm38.5 million worth of bids submitted were accepted. In the same week, Lm7.7 million worth of bills matured. This left the outstanding Treasury bills balance at Lm145.9 million.
The resulting 91-day rate from this auction was 3.8789 per cent, down by 2.66 basis points from the previous month’s level. This reflected a bid price of Lm99.0422 per Lm100 nominal.
On Tuesday the Treasury invited tenders for 91-day bills maturing on 20 April while this week it will invite tenders for 28-day bills maturing on 23 February.
In the secondary market for Treasury bills, trading fell slightly, to Lm0.5 million, from the previous week’s level of Lm0.7 million, with the bulk of the deals having taken place between financial institutions.