On Friday, 11 May, the Central Bank of Malta conducted a seven day term deposit auction, absorbing Lm82.6 million from the banking system. This was Lm9.4 million more than the Lm73.2 million that matured on the same day. The interest rate that resulted from the auction was 3.95 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 an increase in liquidity in the banking system during the week under review. The main contributing factors were net maturing Treasury bills affecting credit institutions by Lm11.6 million, a Lm5.4 million contraction in currency in circulation, direct credits of Lm1.6 million and the fact that credit institutions began the week with a surplus in their statutory reserve deposit accounts with the bank. Partly offsetting these
liquidity boosting factors were purchases of foreign currency against the Maltese lira worth Lm13 million.
Interbank market
No interbank deals were reported during the week.
Treasury Bill market
In the primary market for Treasury bills, the Treasury invited tenders for 364-day bills maturing on 9 May 2008. Of the Lm12.8 million worth of bids submitted, only Lm0.8 million were accepted by the Treasury. As Lm12.8 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by Lm12 million to Lm173.3 million.
The latest 364-day rate resulting from the week’s Treasury bill auction was 4.262 per cent. This was 12.2 basis points higher than the rate on similar bills issued on 15 December 2006 and reflected a bid price of Lm95.8687 per Lm100 nominal.
On Tuesday the Treasury invited tenders for 28-day bills and 182-day bills maturing on 15 June and 16 November 2007, respectively. The following week the Treasury will invite tenders for 91-day bills maturing on 24 August 2007.
Treasury bill trading on the Malta Stock Exchange amounted to Lm0.3 million during the week, while off exchange transactions amounted to Lm0.27 million. Of the Lm0.57 million bills offered for sale, the bank purchased Lm0.37 million.