The Central Bank of Malta conducted a term deposit auction during which a total of Lm94.4 million was absorbed from the banking system. This was Lm9.5 million more than the Lm84.9 million worth of term deposits that matured on the same day. The net absorption was in response to a further increase in liquidity in the banking system during the week.
On aggregate, credit institutions started the week with a slight surplus in the reserve deposit accounts that they are legally bound to hold with the Central Bank. In addition, their liquidity was further boosted by net maturing Treasury bills worth Lm11 million and the sale of Lm2.1 million worth of Treasury bills to the Central Bank in the secondary market.
Moreover, direct credits of Lm3.4 million relating to invalidity pensions and a Lm2.9 million contraction in currency in circulation increased bank liquidity further.
These factors were partly offset by a negative clearing of cheques amounting to Lm3.5 million and the purchase of foreign currency by eligible counter-parties to the tune of Lm5.4 million.
The week under review saw an increase in interbank activity, from the Lm0.3 million transacted in the previous week to Lm2.94 million. A total of four deals were effected all of them in the overnight tenor, at a weighted average interest rate of 3.2493 per cent. This represented an increase of 2.9 basis points over the rate at which a similar deal was struck in the previous week.
In the primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on April 21. From the Lm36.3 million worth of bids submitted, only Lm1 million was accepted. This was due to the continued strong position of government liquidity. Since Lm12 million worth of bills matured in the course of the week, the outstanding balance of Treasury bills decreased by Lm11 million, from Lm176.7 million to Lm165.7 million.
The latest three-month rate resulting from this week's Treasury bill auction was 3.1678 per cent.
This was 4.43 basis points lower than the previous 90-day rate for bills issued in the previous week, with the drop being partly due to the high bid-offer ratio. The latest rate reflected a bid price of Lm99.2164 per Lm100 nominal. Today, the Treasury will invite tenders for 91-day bills maturing on April 28.
Meanwhile, turnover in the secondary market for Treasury bills rose to Lm3 million, with the Central Bank being a net purchaser of Lm1.5 million. This represented a considerable increase from the minimal amount of Lm26,000 transacted in the previous week. All trading was effected by the Central Bank in its role of market-maker.