The banking sector's excess liquidity exhibited a marked increase in the week ended on Friday. The main contributing factors spurring this rise were government payments through direct credits of Lm13.3 million mainly relating to salaries, as well as Lm8 million net maturing treasury bills. Furthermore there were Lm2.4 million dividend payments relating to Government securities. Partly mitigating these liquidity-inducing factors were net payments through the cheque clearing system of Lm3.8 million.
Accordingly, the Central Bank conducted a 14-day term deposit auction on Friday, within the rate band of 2.95 - 3.0 per cent. During this auction, Lm105.5 million were absorbed, which was notably higher than the Lm87.5 million maturing on the same day. As a result, outstanding term deposits held at the Bank increased by Lm18 million, from Lm137.5 million of the previous week to Lm155.5 million. This auction was carried out at a rate of 2.95 per cent, being the floor of the interest rate band at which the Central Bank conducts its term deposit auction.
In the week under review no interbank deals were transacted, further reflecting the excess liquidity situation prevailing across the whole banking sector.
In the primary market, the Treasury invited tenders for 91-day treasury bills to mature on January 23. Notwithstanding that the volume of bids submitted totalled Lm28 million, the Treasury did not issue any bills. Thus the latest 91-day treasury bill rate remained that of 2.9548 per cent which was dealt on October 3. Given that total maturing treasury bills amounted to Lm8 million, the outstanding bills' total decreased to just below Lm248 million.
Today, the Treasury will receive applications for 91-day treasury bills to mature on January 30, 2004. For the following week, the Treasury will again invite tenders for 91-day bills to mature February 6, 2004.
Trading in the secondary market amounted to Lm270,000 in the week under review. These transactions were all effected by the Central Bank in its role as market maker. No deals were transacted outside the Central Bank.