On Friday, 4 August, the Central Bank of Malta conducted a seven-day term deposit auction, absorbing a total of Lm152.7 million, Lm13.7 million more than the Lm139 million that matured on the same day. The rate resulting from the auction was 3.45 per cent, being the floor of the interest rate band (3.45-3.50 per cent) at which the bank is currently conducting its term deposit auctions. The net absorption was in response to a further increase in liquidity in the banking system.
The increase in liquidity mainly resulted from the fact that the Government issued in nominal terms Lm19.3 million worth of Malta Government Stocks, which was Lm15 million less than the Lm34.3 million (also in nominal terms) that matured, direct credits mainly related to pension payments amounting to Lm3.9 million, and interest payments of Lm1.2 million. These factors were partly offset by the fact that credit institutions started the week with an overall shortfall in their statutory reserve deposit accounts with the bank and by the purchase of Lm0.8 million in foreign currency from institutions outside the relevant liquidity pool.
Interbank market
Turnover in the interbank market fell to Lm3.7 million during the week, from Lm4.3 million in the previous week. Of the six deals concluded, five were in the overnight tenor at a weighted average interest rate of 3.23 per cent, down by 19 basis points from the weighted average overnight rate of the previous week. The other deal was struck in the one-week tenor at a rate of 3.43 per cent, unchanged from the rate on a similar deal in the previous week.
Treasury bill market
In the primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on 3 November 2006. From the Lm20.3 million worth of bids submitted, bids for Lm8.2 million were accepted by the Treasury. Since Lm8 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by Lm0.2 million to Lm134.6 million.
The interest rate resulting from the week’s Treasury bill auction was 3.6088 per cent, down by 1.6 basis points from the rate on 91-day bills issued on 28 July 2006. The latest three-month Treasury bill rate reflected a bid price of Lm99.1083 per Lm100 nominal.
Turnover in the secondary market for Treasury bills fell slightly to Lm1.1 million during the week, from Lm1.4 million in the previous week. All trading was effected by the bank in its role as
market-maker.
On Tuesday, the Treasury invited tenders for 91-day bills maturing on 10 November 2006 and 182-day bills maturing on 9 February 2007. In the following week, the Treasury will accept bids for 91-day bills to be issued on 18 August 2006 and maturing on 17 November 2006.