Money Market Report For the week ended Friday 1 December 2006: Further increase in bank liquidity

Malta Independent Thursday, 7 December 2006, 00:00 Last update: about 20 years ago

Central Bank monetary operations

In the week ending 1 December, the Central Bank conducted a six-day term deposit auction (8 December being a public holiday) absorbing a total of Lm145.5 million from the banking system. This was Lm13.8 million more than the amount that matured on the same day. The interest rate resulting from the auction was 3.7 per cent, being the floor of the band (3.7-3.75 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 system during the week under review. The main factors behind this were Government direct credits, mainly related to salary and pension payments, of Lm15.4 million, and a Lm1.9 million contraction in currency in circulation. Partly offsetting these factors were a net issue of Treasury bills totalling Lm5.6 million, a negative net clearing of cheques of Lm3.4 million and the purchase of foreign currency against the Maltese lira from the bank amounting to Lm2.2 million.

Interbank market

There was no interbank activity in the week under review as liquidity was abundant across the entire banking sector.

Treasury bill market

In the primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on 2 March 2007. From the Lm18.3 million worth of bids submitted for these bills, Lm11 million were accepted by the Treasury. As Lm5.3 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by Lm5.7 million to Lm169.1 million. The latest three-month rate resulting from the week’s Treasury bill auction was 3.9194 per cent. This was two basis points higher than the rate on the 91-day bills issued on 17 November, and reflected a bid price of Lm99.0323 per Lm100 nominal.

On Tuesday, the Treasury invited tenders for 92-day bills to be issued on 7 December (8 December being, as noted above, a public holiday) and maturing on 9 March 2007. In the following week, the Treasury will accept bids for 364-day bills maturing on 14 December 2007.

Trading in the secondary market for Treasury bills rose from the previous week’s level of Lm0.7 million to Lm1.1 million. All deals were transacted with the bank in its role of market maker.

Malta Real-time Interbank Payment System (MaRIS) – November 2006

During the month of November, 4,521 payment messages were processed through MaRIS, for a total value of Lm1,690.7 million. Of these, 2,123 were in respect of payments on behalf of customers, for a value of Lm104.7 million, and 2,398 were interbank payments totalling Lm1,586 million. The daily average volume for the month was 206 messages for a value of Lm76.8 million. The highest number of messages was processed on 20 November, with 337 messages, while the highest value was registered on 10 November, with Lm370.2 million.

Further details can be found on the Central Bank

of Malta website: