During the week under review, excess liquidity, which continued to characterise the banking sector, dropped slightly, when compared to the previous week. This decrease in excess liquidity was mainly attributable to the fact that credit institutions started the new maintenance period June 15 to July 14, 2003, with a cumulative shortfall in the reserve deposit accounts which they are legally bound to hold with the Central Bank.
Furthermore, there was a decrease in net foreign assets totalling Lm5.8 million.
Consequently, a 14-day term deposit auction was conducted by the Central Bank on Friday. The Central Bank invited tenders within the rate band of 3.4-3.5 per cent. During this auction, Lm74 million were absorbed, Lm3.5 million less than the amount maturing on the same day.
As a result, outstanding term deposits held at the Bank decreased from Lm152.3 million of the previous week, to Lm148.8 million. The weighted average rate resulting from the auction remained at 3.45 per cent, being the floor of the interest rate band at which the Central Bank conducts its term deposit auction.
One deal was transacted in the interbank market to the tune of Lm1 million. This deal was conducted in the two week tenor at a rate of 3.49 per cent, which is 21 basis points lower than the previous 14-day rate transacted on April 25 at a rate of 3.7 per cent.
This decline reflects the 25 basis point cut in the central intervention rate effected by the Central Bank of Malta on May 27.
In the primary market, the Treasury received tenders for 91-day treasury bills to mature on September 19. Once again, demand for bills exceeded total bills issued. In fact, total bids amounted to Lm36.3 million, while the Treasury issued Lm20 million worth of bills.
Since this was equal to the amount maturing, outstanding treasury bills remained at Lm264.1 million.
The weighted average rate resulting from this auction dropped by four basis points to 3.3990 per cent from 3.4390 per cent (June 6). The new rate reflects a bid price of Lm99.1597 per Lm100 nominal.
Today, the Treasury will receive applications for 91-day treasury bills to mature on September 26 and 273-day bills to mature on March 26, 2004. For the following week, the Treasury will again invite tenders for 91-day treasury bills to mature on October 3.
Turnover in the secondary market in the week under review amounted to Lm1,458,000. Of this, Lm1,400,000 million were the result of interbank deals effected outside the Central Bank.
Furthermore, the Central Bank in its role as market maker transacted deals amounting to just Lm58,000.