During the week under review, the banking system continued to experience excess short-term liquidity. This was mainly due to maturing term deposits amounting to Lm41million and the injection of Lm1.9 million by the Central Bank against purchases of foreign currency from the banks. Moreover the banks ended the week with a substantial cumulative excess in the Reserve
Deposit accounts which they are legally bound to hold with the Central Bank.
These factors more than offset the effect of fund outflows from the commercial banking sector resulting from net purchases of treasury bills amounting to Lm7.3 million in the primary and secondary markets.
Consequently on Friday the Central Bank conducted a term deposit auction where the Bank invited tenders within the rate band of 3.95-4.00 per cent in order to absorb the short-term excess liquidity.
During the auction Lm49.5 million were absorbed, Lm8.5 million more than the amount maturing on that day. As a result outstanding term deposits increased to Lm87.5 million from Lm79 million of the previous week.
The weighted average rate resulting from this auction remained at 3.95 per cent, being the floor of the interest rate band at which the Central Bank conducts its term deposit auction.
During the week under review no deals were reported in the inter-bank market reflecting the excess liquidity across the banking sector.
In the primary market for treasury bills, the government invited tenders for 181-day treasury bills which will mature on December 12, 2002. The amount applied for was Lm28.8 million, whereas the Treasury issued Lm8.5 million, exactly the same amount of maturing treasury bills.
Thus, outstanding treasury bills remained unchanged at Lm198.9 million.
The weighted average rate resulting from this auction was 4.1398 per cent, down by 0.1525 of one percentage point from the previous 182-day rate. This rate corresponds to a price of Lm97.9884 per Lm100.
This week the Treasury will invite tenders for 91-day treasury bills to mature on September 20, 2002, at a price of not less than Lm99.0125 per Lm100 nominal corresponding to a yield of 4.0004 per cent. For the following week, the Treasury will receive applications for 91-day treasury bills. These bills will mature on September 27, 2002.
Turnover in the secondary market amounted to Lm5.1 million during the week under review as compared to Lm12 million transacted the previous week.
The Central Bank effected net purchases of Lm114,000 in its role of market-maker, and there were deals amounting to Lm5 million effected outside the Bank.