Central Bank Monetary Operations
On Friday, 15 September, the Central Bank of Malta conducted a seven-day term deposit auction, absorbing a total of Lm140.4 million from the banking system, Lm7.8 million more than the Lm132.6 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 per cent-3.50 per cent) at which the bank is currently conducting its term deposit auctions.
The net absorption of funds was in response to an increase in liquidity in the banking system. The main factor behind this was the maturing of overnight deposits that had been placed with the bank the previous day, which happened to be the end of the maintenance period. These amounted to Lm34.5 million, which represented the aggregated balances over and above the banks’ statutory reserve requirements. Partly offsetting this increase in liquidity was the issue of new Treasury bills, amounting to Lm6.7 million, which were taken up by credit and financial institutions and a negative net clearing of cheques amounting to Lm1.2 million.
Interbank market
Turnover in the interbank market rose to Lm11.7 million during the week, from Lm9.3 million in the previous week. Four deals were conducted in the overnight tenor at a weighted average interest rate of 3.17 per cent, down by 11 basis points from the comparable rate of the previous week. Three other deals were struck in the one-week tenor at a weighed average rate of 3.38 per cent, unchanged from the weighted average rate on similar deals transacted the previous week.
Treasury bill market
In the primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on 15 December 2006 and 182-day bills maturing on 16 March 2007. From the Lm25.5 million worth of bids submitted for the 91-day bills, Lm6.5 million were accepted by the Treasury, while from the Lm20.5 million worth of bids submitted for the 182-day tenor, only Lm0.3 million were accepted. Given that no Treasury bills matured during the week, the outstanding balance of bills increased by Lm6.8 million to Lm151.5 million.
The latest three-month rate resulting from the week’s Treasury bill auction was 3.6476 per cent. This was 0.4 basis points higher than the rate on 91-day bills issued the previous week and reflected a bid price of Lm99.0988 per Lm100 nominal. The latest rate for the six-month tenor was 3.7905 per cent, or 23.2 basis points lower than the previous rate on six-month bills, those issued on 11 August 2006. This week’s yield reflected a bid price of Lm98.1450 per Lm100 nominal.
In the secondary market for Treasury bills, turnover fell to Lm0.1 million, from the Lm0.8 million of the previous week. All trading was effected by the bank in its role of market-maker.
On Tuesday, the Treasury invited tenders for 363-day bills maturing on 20 September 2007. In the following week the Treasury will accept bids for bills in the 28-day tenor and the182-day tenor to be issued on 29 September 2006 and maturing on 27 October 2006 and 30 March 2007, respectively.