Central Bank monetary operations
On Friday, the Central Bank of Malta conducted a seven-day term deposit auction absorbing Lm68 million from the banking system. This was Lm33 million less than the Lm101 million that matured on the same day. However, one credit institution did not participate in the auction despite having surplus funds.
The interest rate resulting from the auction was 3.95 per cent, which is the floor of the band at which the bank is currently conducting its term deposit auctions.
The principal factors that boosted liquidity in the banking system during the week under review were direct credits, mainly relating to dividend payments and retirement pensions, amounting to Lm9.2 million, net maturing Treasury bills affecting credit institutions worth Lm2.5 million, a positive cheque clearing of Lm1.8 million and a Lm1.9 million contraction in currency in circulation.
Largely offsetting these factors was the fact that credit institutions began the week with a shortfall in their statutory reserve deposit accounts with the bank and that they purchased Lm2 million worth of foreign currency.
Interbank market
The interbank market saw a sharp increase in activity, with one deal in the overnight tenor, three in the seven-day tenor and two in the 14-day tenor being reported, for a total of Lm9.6 million.
The interest rate on the overnight deal was 4.02 per cent, up by two basis points from the previous overnight rate, registered on 18 May.
By contrast, the weighted average rate on the seven-day tenor, at 4.05 per cent, was unchanged from the previous rate on the same tenor, also registered on 18 May.
Meanwhile, the weighted average rate on the 14-day tenor, at 4.03 per cent, was down by one basis point from that on the previous similar deals reported on 11 May.
Treasury bill market
In the primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on 24 August. Out of the Lm29.2 million worth of bids submitted, Lm16.5 million were accepted. Since Lm19.3 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by Lm2.8 million and now stands at Lm175.8 million.
The latest 91-day rate resulting from the week’s Treasury bill auction was 4.226 per cent, which was 3.3 basis points higher than the rate on similar bills issued on 20 April and reflected a bid price of Lm98.9431 per Lm100 nominal.
On Tuesday, the Treasury invited tenders for 91-day bills maturing on 31 August.
Treasury bill trading on the Malta Stock Exchange was thin, amounting to only Lm47,000 during the week, while off exchange transactions amounted to Lm46,000. All trading in Treasury bills involved the bank in its role as market-maker.