Liquidity in the banking system declined in the week under review, reversing the rise experienced in the previous week. This was due to a number of transfers from the banking sector to the government, which were mainly related to tax payments, and by some currency withdrawals of Lm1.7 million.
Moreover, credit institutions started the week with a shortfall in their reserve deposit accounts which they are legally bound to hold with the Central Bank of Malta.
Accordingly, on Friday, the bank conducted a reverse repo operation where a total of Lm7.3 million was injected in the market.
This coincided with the maturity of a Lm1 million term deposit. As a result, the bank's position vis-à-vis the credit institutions in respect of monetary operations switched from a net debtor balance of Lm4 million the week before to a net creditor balance of Lm4.3 million.
The weighted average rate of the operation was 3.27 per cent.
Interbank market activity remained buoyant in the week under review with the volume of transactions amounting to Lm6 million. Rates were broadly in line with those of the previous week.
In the Treasury market the government invited tenders for 91-day bills to mature on October 7. A total of Lm12.4 million were accepted from the Lm17.4 million bids submitted. As a result, given that Lm14.3 million bills matured, the level of outstanding Treasury bills declined by Lm1.9 million to Lm214.4 million. The primary 91-day rate was 3.2648 per cent, virtually unchanged from the previous rate dated June 10. This corresponded to a weighted average price of Lm99.1926 per Lm100 nominal.
Today the Treasury will receive bids for 91-day bills to mature on October 14 while in the following week the Treasury will receive bids for 28-day bills to mature on August 19.
Activity in the secondary market declined somewhat after the pick-up of the previous week. In fact only Lm1.7 million was transacted when compared to the Lm7.6 million dealt a week earlier. All trades were conducted with the Central Bank in its role as a market maker for Malta Government securities.