Central Bank monetary operations

On Tuesday 28 February 2006, the governor of the Central Bank of Malta, following the monthly meeting with the Monetary Policy Advisory Council, decided to leave the Bank’s Central Intervention Rate unchanged at 3.25 per cent (see www.centralbankmalta.com).

On Friday 3 March, the Bank conducted a seven-day term deposit auction, absorbing a total of Lm116.5 million from the banking system. This was Lm4.5 million less than the Lm121 million worth of term deposits that matured on the same day. The rate resulting from the auction was 3.20 per cent, being the floor of the interest rate band (3.20 per cent–3.25 per cent) at which the Bank conducts its term deposit auctions.

Liquidity in the banking system decreased in the week under review, as credit institutions started the week with a shortfall in the reserve deposit accounts that they are legally bound to hold with the bank. Other factors that contributed to the decline in liquidity included a net issue of Treasury bills to the tune of Lm15.3 million, a Lm3 million expansion in currency in circulation and sales of foreign exchange by the Bank valued at Lm2.1 million.

The impact of these liquidity-reducing developments was mitigated by government direct credits of Lm6.8 million, mainly related to pensions, and dividend payments amounting to Lm1.3 million.

Interbank market

Interbank activity decreased to Lm3.9 million during the week, compared with the Lm4.7 million transacted in the previous week. From a total of four deals, two were effected in the overnight tenor, at a weighted average interest rate of 3.22 per cent. This was three basis points lower than the overnight rate of the previous week. The other two deals were conducted in the one-week tenor at a weighted average interest rate of 3.1645 per cent, representing a decline of 0.7 basis points from the comparable rate of the previous week.

Treasury bill market

In the primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on 2 June 2006. From the Lm30.5 million worth of bids submitted, tenders for Lm25 million were accepted by the Treasury. Given that on the same day Lm13.7 million worth of bills matured, the outstanding balance of Treasury bills increased by Lm11.3 million, from Lm179.6 million to Lm190.9 million.

The latest three-month rate resulting from the week’s Treasury bill auction was 3.2029 per cent, up by 2 basis points from the previous week’s level. The latest rate reflected a bid price of Lm99.2078 per Lm100 nominal.

On Tuesday, the Treasury invited tenders for 91-day bills maturing on 9 June. In the following week, the Treasury will accept bids for 273-day bills to be issued on 17 March 2006 and maturing on 15 December 2006.

Turnover in the secondary market for Treasury bills was minimal, at Lm0.1 million. This was Lm1.1 million less than the Lm1.2 million turnover recorded in the previous week. All deals were effected by the Bank in its role of market-maker.

MaRIS statistics for February

During the month of February there were 3,808 payment messages processed through MaRIS, for a total value of Lm1,482.4 million. Of these, 1,581, for a value of Lm73.6 million, were related to payments on behalf of customers, while 2,227, for a value of Lm1,408.8 million, were in respect of interbank payments. The daily volume average for the month was 200 messages for a value of Lm78.0 million. The peak number of messages was processed on 3 February, with 240 messages, whilst the highest value was registered on 24 February, with Lm300.3 million.

Further details can be found on the Central Bank of Malta website: www.

centralbankmalta.com