The banking sector's level of excess liquidity increased in the week ended on Thursday, April 8. This rise was attributable to the fact that credit institutions started the week under review with an excess in the reserve deposit accounts which they are legally bound to hold with the Central Bank of Malta.
Other inflows accentuating this rise included net maturing treasury bills of Lm4 million, the purchase by the Central Bank of Lm3.6 million worth of foreign currency against Maltese lira from credit institutions, Lm2.5 million government payments in direct credits mainly relating to children's allowances and net receipts through the cheque clearing system totalling Lm2.7 million.
Consequently, on Thursday, the Central Bank of Malta held a 15-day term deposit auction (Friday, April 9 was a public holiday), absorbing Lm109.3 million from the banking sector. This was higher than the Lm96.7 million worth of term deposits maturing on the same day. Thus, outstanding term deposits held by credit institutions at the Central Bank increased by Lm12.6 million, from Lm117.7 million to Lm130.3 million. This auction was carried out at a rate of 2.95 per cent, being the floor of the interest rate band (2.95-3.00 per cent) at which the Central Bank conducts its term deposit auction.
The interbank market was inactive in the week under review, which further reflects the excess liquidity characterising the whole banking sector.
In the primary market, the Treasury invited tenders for 92-day and 183-day treasury bills to mature on July 9 and October 8 respectively. The volume of bids submitted for both issues far exceed the bills issued by the Treasury. In fact, Lm25.1 million bids were received for the three-month issue, with the Treasury issuing only Lm3 million. For the six-month auction, Lm11 million treasury bills were issued by the Treasury against Lm38.7 million bids. Considering that total maturing treasury bills (363-day tenor) amounted to Lm18 million, the outstanding bills' total decreased by Lm4 million, from Lm263 million to Lm259 million.
The primary treasury bill rate for the three-month auction dropped by 1.04 basis points from 2.9247 per cent to 2.9143 per cent. The latest rate reflects a bid price of 99.2708 per Lm100 nominal. The six-month rate declined by 1.51 basis points (2.9061 per cent) compared to the previous 2.9212 per cent for bills issued on March 12. This rate reflects a bid price of 98.5639 per Lm100 nominal.
Today, the Treasury will receive applications for 91-day bills to mature on July 16. Next week, the Treasury will receive tenders for 91-day treasury bills to mature on July 23.
Activity in the treasury bill secondary market was subdued during the week reviewed. Total turnover amounted to Lm208,000 which is Lm1,873,000 lower than the total transacted in the previous week. All deals were effected by the Central Bank in its role as market maker, which effected net sales of Lm108,000.