Excess liquidity continued to characterise the banking system in the week under review, albeit at a lower level than the previous week. This decrease was mainly due to the fact that credit institutions started the week with a shortfall in the reserve deposit account which they are legally bound to hold with the Central Bank.
A decrease in the Central Bank's net foreign assets totalling Lm1.4 million together with an increase of currency in circulation of Lm1 million also contributed to the decrease in excess liquidity.
Consequently, a 14-day term deposit auction was conducted by the Central Bank on Friday, within the rate band of 3.2-3.25 per cent. During this auction, Lm48 million were absorbed, Lm 8 million less than the amount maturing on the same day.
As a result, outstanding term deposits held at the bank decreased from Lm133 million of the previous week, to Lm125 million. This auction was carried out at a rate of 3.2 per cent, being the floor of the interest rate band at which the Central Bank conducts its term deposit auction.
No interbank deals were transacted in the week under review. This further reflects the excess liquidity prevailing in the banking sector.
In the primary market, the Treasury received tenders for 91-day treasury bills to mature on November 7. Total volume of bids submitted for this auction amounted to Lm26.2 million, with the Treasury issuing only Lm9 million worth of treasury bills.
Given that maturing treasury bills (91-day) amounted to Lm10 million, the level of outstanding treasury bills dropped by Lm1 million, from Lm248.1 million to Lm247.1 million.
The weighted average rate for the 91-day bill issue was 3.1784 per cent, reflecting a bid price of 99.2138. This rate is 5.33 points higher than the previous 91-day treasury bill primary rate.
Today, the Treasury will receive applications for 92-day treasury bills to mature November 14. Next week the Treasury will invite tenders for 91-day bills to mature on November 21.
Turnover in the secondary market during the week under review amounted to Lm666,000, transacted by the Central Bank in its role as market maker. No deals were effected outside the Central Bank.