On Friday, the Governor of the Central Bank of Malta, following the meeting with the Monetary Policy Advisory Council, decided to leave the bank's central intervention rate unchanged at three per cent.
The banking sector continued to be characterised with a high volume of excess liquidity, which increased in the week ended on Friday. The main liquidity-enhancing factor was the Lm14.1 million government payments in direct credits mainly relating to salaries. Further accentuating this rise was the purchase of Lm1.2 million worth of foreign currency against Maltese lira by the Central Bank from credit institutions. Partly offsetting these inflows was the fact that credit institutions started the week with a slight shortfall in their reserve deposit accounts which they are legally bound to hold with the Central Bank of Malta. Furthermore, there was the net issuance of Lm3 million treasury bills and net payments through the cheque clearing system of Lm1.2 million.
Consequently, on Friday, a 13-day term deposit auction (since Friday, April 9, happens to be a public holiday) was conducted by the Central Bank, where Lm96.7 million were absorbed from the banking sector. This was Lm16.4 million higher than the Lm80.3 million maturing on the same day. Thus, outstanding term deposits held at the Bank increased from Lm118.3 million to Lm134.7 million. This auction was carried out at a rate of 2.95 per cent, being the floor of the interest rate band (2.95-3.00 per cent) at which the Central Bank conducts its term deposit auction.
As in the previous week there were no interbank deals transacted in the week under review, reflecting the short-term liquidity prevalent across the whole banking sector.
In the primary market, the Treasury invited tenders for 91-day treasury bills to mature on June 25. Notwithstanding that the number of bids totalled Lm59.9 million, the Treasury issued Lm29 million bills. Given that Lm26 million treasury bills matured, the outstanding bill total increased by Lm3 million, that is from Lm250 million to Lm253 million.
The primary rate for this issue was 2.9251 per cent, which was only marginally higher (0.16 basis points) than the previous three-month rate of 2.9235 per cent. This previous rise in the 91-day bill rate was for bills issued on February 20. The latest rate reflects a bid price of 99.2760 per Lm100 nominal.
Today, the Treasury will receive applications for 91-day treasury bills to mature on July 2. Next week the Treasury will invite tenders for 92-day bills to mature on July 9.
Turnover in the secondary market in the week under review decreased substantially from Lm3,474,000 to Lm85,000. All deals were transacted by the Central Bank, which in its role as market maker effected net purchases of Lm1,000.