Central Bank monetary operations
On Friday, the Central Bank of Malta conducted a seven-day term deposit auction absorbing Lm126.5 million from the banking system. This was Lm8.3 million less than the Lm134.8 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. Credit institutions started the new maintenance period (15 March-14 April 2007) with an overall shortfall in their statutory reserve deposit accounts with the bank, while a Lm1.4 million negative net clearing of cheques squeezed liquidity further.
Partly offsetting these factors was a Lm1 million contraction in currency in circulation.
Interbank market
In the interbank market, four deals for a total of Lm4.4 million were conducted in the overnight tenor at a weighted average interest rate of 3.94 per cent, up by two basis points from the comparable rate on similar deals transacted in the week ended 16 February 2007.
Treasury Bill market
In the primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on 15 June. From the Lm22.9 million worth of bids submitted for these bills, bids for only Lm0.5 million were accepted by the Treasury.
Given that Lm0.3 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased slightly, to Lm169.2 million.
The latest three-month rate resulting from the week’s Treasury bill auction was 4.1162%, practically unchanged from the rate on the 91-day bills issued on 2 March, and reflected a bid price of Lm98.9842 per Lm100 nominal.
On Tuesday, the Treasury invited tenders for 91-day bills maturing on 22 June, while the following week it will invite tenders for 182-day bills maturing on 28 September.
In the secondary market for Treasury bills, trading increased to Lm3.9 million from the previous week’s level of Lm2.1 million. Most of this activity was transacted outside the Central Bank of Malta.