On Thursday, the Central Bank governor, following the monthly meeting with the Monetary Policy Advisory Council, decided to leave the bank's central intervention rate unchanged at 3.25 per cent.

Surplus liquidity in the banking system in the week under review continued to increase. The main factors contributing to this increase were net maturing Treasury bills amounting to Lm6.8 million, government direct credits of Lm2.5 million and a net decrease in currency in circulation totalling Lm1.8 million. Partially offsetting this increase was a negative net clearing of cheques amounting to Lm2.8 million.

Accordingly, on Friday, the bank conducted a 14-day term deposit auction. An aggregate of Lm23 million was absorbed from the banking sector, Lm9.4 million more than the Lm13.6 million worth of term deposits that matured on the same day. As a result, the bank's outstanding term deposits increased from Lm34.9 million to Lm44.3 million. The rate resulting from the latest auction was 3.20 per cent, being the floor of the interest rate band (3.20- 3.25 per cent) at which the bank conducts its auctions.

Interbank activity decreased sharply to Lm3.3 million from Lm16.5 million. Rates remained broadly unchanged from previous levels.

In the primary market, the Treasury invited tenders for 182-day Treasury bills to mature on February 24, 2006. Only Lm9 million of the Lm21.7 million worth of bids submitted were accepted by the Treasury. Given that Lm17.1 million worth of bills matured during the week under review, the outstanding balance of Treasury bills decreased by Lm8.1 million, from Lm202.2 million to Lm194.1 million.

The latest six-month rate resulting from this auction was 3.2790 per cent. This was 0.4 basis points lower than the previous 182-day rate for bills issued on June 17, 2005. The latest rate reflects a bid price of Lm98.3913 per Lm100 nominal.

Today, the Treasury will receive applications for 91-day bills to mature on December 2. For the following week, the Treasury will accept bids in the same tenor to mature on December 9.

Turnover in the secondary market decreased slightly from the previous week's level of Lm1.2 million to Lm0.9 million. All trading was effected by the bank in its role of market-maker.

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