The level of excess liquidity in the banking system decreased substantially in the week under review. This was in part due to the fact that credit institutions started the week under review with a shortfall in their reserve deposit accounts which they are legally bound to hold with the Central Bank.
Furthermore, there was a net issue of Treasury bills amounting to Lm20.6 million and a negative net clearing of cheques amounting to Lm5.2 million which reduced liquidity further.
Partially offsetting this decrease in liquidity were government direct credits of Lm14.6 million and the sale of foreign currency against the Maltese lira by the credit institutions to the Central Bank amounting to Lm8 million.
Accordingly, on October 7, the Central Bank conducted a seven-day term deposit auction. An aggregate of Lm51.5 million was absorbed from the banking sector during this auction, considerably less than the Lm80.5 million worth of term deposits which matured on the same day.
As a result, the credit institutions' outstanding term deposits with the Central Bank decreased by Lm29 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 Central Bank conducts its absorption auctions.
Interbank activity in the week under review amounted to Lm8.5 million, an increase of Lm1.2 million from the previous week's level of Lm7.3 million. The bulk, Lm7.5 million, was transacted in the one-week tenor, at a marginally higher rate than the previous week. The rest was effected in the two-week tenor, at a slightly lower rate than before.
In the primary market, the Treasury invited tenders for 91-day Treasury bills to mature on January 6, 2006. From the Lm33.5 million worth of bids submitted, Lm33 million were accepted by the Treasury.
Given that Lm12.4 million worth of bills matured during the week under review, the outstanding balance of Treasury bills increased by Lm20.6 million, from Lm174.5 million to Lm195.1 million.
The latest three-month rate resulting from this auction was 3.2550 per cent. This was 0.6 basis points lower than the previous 91-day rate for bills issued on September 9, 2005. The latest rate reflects a bid price of Lm99.195 per Lm100 nominal.
Today, the Treasury will receive applications for 91-day bills to mature on January 13, 2006. For the following week, the Treasury will accept bids in the same tenor to mature on January 20, 2006.
Turnover in the secondary market decreased from the previous week's level of Lm1.5 million to Lm0.4 million. All trading was effected by the Central Bank in its role of market-maker.
During the month of September, the number of payment messages processed through the local payments system, MaRIS, was slightly less than the previous month, down from 3,992 to 3,884. In contrast, the value of payments processed increased sharply during the same period from Lm866.9 million to Lm1,167.2 million.
Payment messages processed during September can be divided in 1,644 customer payments for a value of Lm69.6 million and 2,240 interbank payments totalling Lm1,097.6 million.
The daily volume average for the month under review was 194 messages for a value of Lm58.4 million. The peak day for the highest number of messages processed was September 9 with 258 messages, while the highest value was registered on September 30, with Lm192.1 million.