During the week under review, liquidity in the banking system increased following the declines of the past three weeks. This increase was mainly due to Lm57 million maturing term deposits, currency deposits with the Central Bank of Lm4.2 million, sales of foreign currency to the Central Bank totalling Lm4 million and direct credits of Lm3 million relating mainly to the payment of pensions.
Moreover, banks had favourable cheque clearings totalling Lm2.1 million and cumulative excess in the reserve deposit account which they are legally bound to hold with the Central Bank. This excess liquidity was partly offset by an increase in the banks' treasury bill holdings of Lm10.1 million.
Consequently, on Friday, the Central Bank of Malta conducted a term deposit auction in order to absorb these excess funds. Following this auction, Lm76.1 million were absorbed while Lm57 million matured. As a result the level of outstanding term deposits increased from Lm80 million to Lm99.1 million.
The weighed average rate resulting from this auction was 3.7 per cent, being the floor of interest rate band of 3.7-3.8 per cent, at which the Central Bank conducts its weekly auctions for 14-day money.
During the week under review no interbank deals were transacted. This is a reflection of the excess liquidity prevailing across the banking system.
In the primary market, the Treasury invited tenders for 91-day treasury bills, to mature on April 11. Once again, the tender was well taken by the market.
In fact applications totalled Lm43.2 million, while the Treasury issued only Lm13 million worth of bills, which is equivalent to the volume of treasury bills that matured on the same day. As a result the outstanding treasury bill total remained at the same level of Lm227.8 million.
The weighted average rate resulting from this auction was 3.6917 per cent, reflecting a bid price of Lm99.088 per Lm100 nominal. This yield is marginally lower than the previous 91-day rate of 3.7019 per cent.
Today the Treasury will invite tenders for 90-day treasury bills to mature on April 17. Next week the Treasury will receive applications for 91-day treasury bills to mature on April 25.
In the secondary market, total turnover amounted to Lm10.2 million. From these, Lm10 million were transacted outside the Central Bank.