Liquidity in the banking sector picked up slightly in the week under review when compared to the previous week. Credit institutions started the week under review with a surplus in their reserve deposit accounts which they are legally bound to hold with the Central Bank of Malta. Other factors contributing to this increase were the sale of Treasury bills by credit institutions in the secondary market totalling Lm7.4 million and direct credits of Lm2.8 million.
Accordingly, on Friday, 1 July the Bank offered a 14-day term deposit auction. A total of Lm3 million was absorbed from the banking system, taking the total level of outstanding term deposits to Lm4 million. On the same day, Lm6 million worth of reverse repos matured. The rate resulting from the latest term deposit auction remained at 3.2 per cent, being the floor of the term deposit interest rate band.
Interbank market
Two interbank deals totalling Lm8.8 million were transacted in the two-week and one-month tenors. Rates in both tenors increased by around three basis points.
Treasury bill market
In the primary market, the government invited tenders for 28-day Treasury bills to mature on 29 July 2005 and 364-day Treasury bills to mature on 30 June 2006. The amount of bids submitted for the one-month tenor was Lm6 million, of which none were accepted by the Treasury. On the other hand, out of the Lm19.5 million worth of bids submitted for the one-year Treasury bills, Lm16.8 million were accepted by the Treasury. This was Lm1 million higher than the amount of Treasury bills that matured on the same day. Consequently, the outstanding balance of Treasury bills increased from the previous week’s level of Lm215.3 million to Lm216.3 million.
The latest one-year rate resulting from this auction was 3.5025 per cent, that is, 0.4 basis points lower than the previous 364-day rate for bills issued on 13 May.
The latest rate reflects a bid price of Lm96.6250 per Lm100 nominal.
Turnover in the Treasury bill secondary market picked up considerably after the low level of the past few weeks and amounted to Lm7.6 million.
All trading was effected with the Bank in its role of market-maker.