During the last week of February, the banking sector exhibited a decline in excess short-term liquidity. This was due to the fact that credit institutions started the week under review with a shortage in their reserve deposit accounts which they are legally bound to hold with the Central Bank. These outflows were partially offset by Lm76.5 million in term deposits, Lm11.5 million direct credits mainly relating to salaries and treasury pensions together with net maturing treasury bills of Lm2.3 million.
Accordingly, a 14-day term deposit auction was conducted by the Central Bank of Malta on Friday where the bank invited tenders within the rate band of 3.7-3.75 per cent. During the auction, Lm70 million were absorbed, Lm6.5 million less than the amount maturing on the same day. As a result, outstanding term deposits decreased to Lm130 million from Lm136.5 million.
The weighted average rate resulting from this auction remained at 3.7 per cent, being the floor of the interest rate band at which the Central Bank conducts its term deposit auction.
No interbank deals were transacted in the interbank market. This reflects the high level of excess liquidity characterising the banking system.
In the primary market for treasury bills, the government invited tenders for 91-day treasury bills to mature on May 30, 2003. The amount of applications approximately totalled Lm58.4 million. Since the volume of treasury bills issued was equivalent to the amount of bills maturing, total outstanding treasury bills remained at Lm235.3 million.
The weighted average rate resulting from this auction was 3.6525 per cent, reflecting a bid price of Lm99.0976 per Lm100 nominal. The latest 91-day rate was lower than the 3.6639% of the previous week's tender.
Today, the Treasury invites tenders for 91-day treasury bills to mature on June 6. Next week, the Treasury will again invite tenders for 182-day treasury bills to mature on September 12.
During the week under review, turnover in the secondary market amounted to Lm79,000. All deals were effected by the Central Bank in its role as market maker.