Central Bank Monetary Operations
On Friday 9 February, the Central Bank of Malta conducted a seven-day term deposit auction absorbing Lm130.9 million from the banking system. This was Lm9.4 million less than the Lm140.3 million that matured on the same day. The interest rate that resulted from the auction was 3.95 per cent, which is the floor of the interest rate band at which the bank is currently conducting its term deposit auctions.
The net injection of funds was in response to a decrease in liquidity in the banking system during the week under review. In fact, credit institutions started the week with a substantial shortfall in their statutory reserve deposit accounts with the bank, while purchases of Lm4.2 million worth of foreign currency against the Maltese lira squeezed liquidity further. Partly offsetting these factors were a positive net clearing of cheques totalling Lm1.3 million and net transfers of Lm9.3 million (mainly related to pension payments) by the government to the credit institutions.
Interbank Market
No interbank deals were reported during the week.
Treasury Bill Market
In the primary market for Treasury bills, the Treasury invited tenders for 273-day bills maturing on 9 November 2007. Out of the Lm26.8 million worth of bids submitted, Lm11.3 million were accepted by the Treasury. As Lm12.5 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased slightly, by Lm1.2 million to Lm143.7 million.
The latest nine-month rate resulting from the week’s Treasury bill auction was 4.2349 per cent. This was 16.4 basis points higher than the rate on the 273-day bills issued on 10 November 2006 and reflected a bid price of Lm96.9298 per Lm100 nominal. This was the first auction for 273-day bills since the 25 basis point increase in the Central Intervention Rate on 25 January.
On Tuesday, the Treasury invited tenders for 91-day bills maturing on 18 May 2007 and 182-day bills maturing on 17 August. The following week, the Treasury will invite bids for 91-days bills maturing on 25 May.
In the secondary market for Treasury bills, trading increased slightly from the previous week’s insignificant amounts to Lm0.1 million. All deals were transacted with the bank in its role of market-maker.