Central Bank Monetary Operations

On Tuesday, 31 October, following the monthly meeting of the Monetary Policy Advisory Council, the Governor of the Central Bank of Malta decided to raise the bank’s Central Intervention Rate by 25 basis points to 3.75 per cent (see www.centralbankmalta.com).

In the week ending 3 November, the bank conducted a term deposit auction, absorbing a total of Lm171 million, Lm18.5 million more than the amount that matured on the same day. The rate resulting from the auction was 3.7 per cent, being the floor of the new interest rate band (3.7 per cent-3.75 per cent) at which the bank will now be conducting its term deposit auctions.

Liquidity in the banking system continued to increase in the week under review. Credit institutions began the week with an overall surplus in their statutory reserve deposit accounts held with the bank. In addition, Government direct credits, mainly related to salaries and pensions and amounting to Lm13.2 million, further boosted liquidity. Partly offsetting these factors were a negative net clearing of cheques, related mainly to income tax and customs duty payments, amounting to Lm5.1 million, a net issue of Treasury bills of Lm3.7 million and the purchase of foreign currency against the Maltese lira from the bank of Lm1.4 million.

Interbank market

Interbank activity remained unchanged from the previous week. One deal, amounting to Lm2 million, was effected in the overnight tenor at a rate of 3.85 per cent, 111 basis higher than the weighted average interest rate on similar deals struck in the week ended 13 October 2006. This deal was executed after the bank’s rate increase.

Treasury bill market

In the primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on 2 February 2007. From the Lm35.7 million worth of bids submitted, tenders for Lm12 million were accepted by the Treasury. Given that on the same day Lm8.2 million worth of bills matured, the outstanding balance of Treasury bills increased by Lm3.7 million to Lm135.8 million. The latest rate on 91-day Treasury bills was 3.7424 per cent, up by 12 basis points from the previous comparable rate, that on bills issued on 20 October 2006. The latest three-month rate reflected a bid price of Lm99.0756 per Lm100 nominal.

On Tuesday, the Treasury invited tenders for 273-day bills maturing on 10 August 2007 and for 182-day bills maturing on 11 May 2007. In the following week the Treasury will accept bids for 91-day bills maturing on 16 February 2007.

Trading in the secondary market for Treasury bills decreased from the previous week’s level of Lm2.3 million to Lm0.2 million. All deals were transacted with the bank in its role of market maker.

Malta Real-time Interbank Payment System (MaRIS)

– October 2006

During the month of October 2006, 4,671 payment messages were processed through MaRIS, for a total value of Lm1,800.5

million. Of these, 2,061 were payments on behalf of customers, for a value of Lm66.8 million, while 2,610 were interbank payments totalling Lm1,733.7 million. The daily average volume for the month was 212 messages for a value of Lm81.8 million. The highest number of messages was processed on 16 October, with 250 messages, while the highest value was registered on 6 October, with Lm375.2 million.

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