On Friday, the Central Bank of Malta conducted a seven-day term deposit auction absorbing Lm87 million from the banking system. This was Lm7.1 million less than the Lm94.1 million that matured on the same day. The interest rate that resulted from the auction was 4.20 per cent, which is the floor of the interest rate band at which the Bank is currently conducting its term deposit auctions.
The net injection of funds was in response to a decrease in liquidity in the banking system during the week under review. The factors contributing to this were a negative net cheque clearing of Lm6.3 million and the fact that credit institutions began the week with a substantial shortfall in their statutory reserve deposit accounts with the Bank.
Partly offsetting these factors were direct credits of Lm14.9 million, mainly related to the payment of government salaries, net maturing Treasury bills amounting to Lm6.4 million and a Lm3.8 million contraction in currency in circulation. No interbank deals were reported during the week. In the primary market for Treasury bills, the Treasury invited tenders for 182-day bills maturing on February 8, 2008. Out of the Lm13.6 million worth of bids submitted, bids for Lm3.6 million were accepted. Since Lm10 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by Lm6.4 million to Lm186.4 million.
The latest 182-day yield resulting from the week's Treasury bill auction was 4.491 per cent. This was 7.6 basis points higher than the rate on similar bills issued on July 6 and represented a bid price of 97.78 per 100 nominal.
Today the Treasury will invite tenders for 91-day bills maturing on November 16, 2007. The following week the Treasury will invite tenders for 91-day and 182-day bills maturing respectively on November 23, 2007 and February 22, next year.
Treasury bill trading on the Malta Stock Exchange amounted to Lm170,000. All transactions were conducted by the Bank in its role as market maker. No deals were transacted on an off-Exchange basis.