Central Bank monetary operations

Liquidity in the banking system declined in the week under review, reversing the rise experienced in the previous week.

This was due to a number of transfers from the banking sector to the government, which were mainly related to tax payments, and by some currency withdrawals of Lm1.7 million.

Moreover credit institutions started the week with a shortfall in their reserve deposit accounts which they are legally bound to hold with the Central Bank of Malta.

Accordingly, on Friday, 8 July the Bank conducted a reverse repo operation where a total of Lm7.3 million was injected in the market. This coincided with the maturity of a Lm1 million term deposit. As a result the Bank’s position vis-à-vis the credit institutions in respect of monetary operations switched from a net debtor balance of Lm4 million the week before to a net creditor balance of Lm4.3 million. The weighted average rate of the operation was 3.27 per cent.

Interbank market

Interbank market activity remained buoyant in the week under review with the volume of transactions amounting to Lm6 million.

Rates were broadly in line with those of the previous week.

Treasury bill market

In the Treasury market the government invited tenders for 91-day bills to mature on 7 October 2005. A total of Lm12.4 million were accepted from the Lm17.4 million bids submitted. As a result, given that Lm14.3 million bills matured, the level of outstanding Treasury bills declined by Lm1.9 million to Lm214.4 million.

The primary 91-day rate was 3.2648 per cent, virtually unchanged from the previous rate dated 10 June.

This corresponded to a weighted average price of Lm99.1926 per Lm100 nominal.

Activity in the secondary market declined somewhat after the pick-up of the previous week. In fact only Lm1.7 million was transacted when compared to the Lm7.6 million dealt a week

earlier.

All trades were conducted with the Central Bank in its role as a market maker for Malta Government securities.