Central Bank Monetary Operations
On Tuesday, 28 March, following the monthly meeting with the Monetary Policy Advisory Council, the Governor of the Central Bank of Malta decided to leave the Bank’s central intervention rate unchanged at 3.25 per cent. (see www.centralbankmalta.com)
On Thursday, 30 March (Friday 31 March being a public holiday) the Bank conducted an eight-day term deposit auction, absorbing a total of Lm79 million from the banking system. This was Lm9.4 million less than the Lm88.4 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 (3.20-3.25 per cent) at which the bank is currently conducting its term deposit auctions.
The net injection of funds was in response to a decline in bank liquidity during the week under review. In fact, credit institutions started the week with a shortfall in the reserve deposit accounts that they are legally bound to hold with the bank, while fund withdrawals of Lm12.2 million, mainly in connection with the issue of Malta Government Stocks in the previous week, together with a Lm3.3 million expansion in currency in circulation and a Lm2.4 million net issue of Treasury bills also contributed. The impact of these liquidity-reducing developments was mitigated by government direct credits of Lm12 million, mainly related to payments of pensions and dividends, and the sale of Lm8.7 million worth of Treasury bills by credit institutions to the Bank in the secondary market.
Interbank market
Interbank activity decreased to Lm3 million during the week, compared with the Lm5.4 million transacted in the previous week. A total of four deals were effected, all in the overnight tenor, at a weighted average interest rate of 3.15 per cent. This was 9.6 basis points lower than the overnight rate of the previous week. In the latter part of the week, however, the general level of bid/offer rates quoted by the banks was adjusted upwards by between two and 20 basis points, particularly at the longer end of the money market yield curve.
Treasury bill market
In the primary market for Treasury bills, the Treasury invited tenders for 365-day bills maturing on 30 March 2007. From the Lm46.4 million worth of bids submitted, tenders for Lm14 million were accepted by the Treasury. Given that on the same day Lm10.3 million worth of bills matured, the outstanding balance of Treasury bills increased by Lm3.7 million, from Lm175.3 million to Lm179 million.
The latest rate for the 365-day Treasury bills was 3.4576 per cent, an increase of 13.7 basis points from the previous one-year rate that for bills issued on 6 January 2006. The latest rate reflected a bid price of Lm96.658 per Lm100 nominal.
On Tuesday, the Treasury invited tenders for 91-day bills maturing on 7 July 2006. In the following week the Treasury will accept bids for 92-day bills to be issued on Thursday 13 April (14 April being Good Friday) and maturing on 14 July 2006.
Activity in the secondary market for Treasury bills picked up strongly during the week under review, with turnover reaching Lm9.9 million, in contrast to the minimal amounts transacted in the previous week. Hence the Bank, in its role of market-maker, effected net purchases of Lm9.8 million.
MaRIS Statistics for the month of March
During the month of March 4,314 payment messages were processed through MaRIS, for a total value of Lm1,717.6 million. Of these, 1,858 were in respect of payments on behalf of customers, for a value of Lm89.7 million, while 2,456 were interbank payments totalling Lm1,627.9 million. The daily volume average for the month was 196 messages, for a value of Lm78.1 million. The peak number of messages was processed on 27 March, with 280 messages. The highest value was registered on 3 March, with Lm291.8 million.
Further details can be found on the Central Bank of Malta website: www.centralbankmalta.com