Excess short-term liquidity increased last week following the decline in the previous fortnight. This higher surplus was mainly due to the fact that credit institutions started the week under review with an excess in their reserve deposit accounts which they are legally bound to hold with the Central Bank.
Furthermore, there were Lm36 million maturing term deposits, the injection of Lm4.5 million against the purchase of foreign currency by the Central Bank and net maturing Malta Government Stocks of Lm15.5 million. This was partially mitigated by the net issue of treasury bills totalling Lm7.2 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, Lm60 million were absorbed, Lm24 million more than the amount maturing on the same day.
As a result, outstanding term deposits increased to Lm136.5 million from Lm112.5 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.
Once again no interbank deals were transacted in the interbank market, reflecting 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 23. The amount of applications approximately totalled Lm55.7 million.
Since the Treasury issued Lm15 million and the amount of bills maturing was Lm20 million, total outstanding treasury bills decreased to Lm235.3 million.
The weighted average rate resulting from this auction was 3.6639 per cent, reflecting a bid price of Lm99.0948 per Lm100 nominal. The latest 91-day rate was slightly lower than the 3.6717 per cent of the previous week's tender.
Today, the Treasury invites tenders for 91-day treasury bills to mature on May 30. Next week, the Treasury will again invite tenders for 91-day treasury bills to mature on June 6.
During the week under review, turnover in the secondary market amounted to Lm12,667,000 with net purchases effected by the Central Bank in its role as market maker, totalling Lm131,000. Deals transacted outside the Central Bank totalled Lm12.5 million.