The banking system continued to exhibit excess liquidity in the week under review. This surplus was mainly attributable to the fact that credit institutions started the week with a cumulative excess in their reserve deposit accounts which they are legally bound to hold with the Central Bank. Furthermore, there were net maturing treasury bills of around Lm5 million and a decrease in bank notes in circulation which furthur contributed to the increase in the banks' excess liquidity.
Accordingly, a 14-day term deposit auction was conducted by the Central Bank on Friday. The Central Bank invited tenders within the rate band of 3.7-3.75 per cent. During this auction, Lm68 million were absorbed, Lm15 million more than the amount maturing on the same day. As a result, outstanding term deposits held at the Central Bank increased from Lm116.5 million of the previous week, to Lm 131.5 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 Bank conducts its term deposit auction.
No interbank deals were transacted during the week reviewed. This further reflects the excess liquidity across the whole banking sector.
In the primary market, the Treasury received tenders for 91-day treasury bills to mature on August 22. Demand for bills was again much higher when compared to the total bills issued by the Treasury. In fact, total bids amounted to Lm45.8 million, while the Treasury issued Lm10 million worth of bills. Since Lm15 million matured on the same day, the amount of treasury bills held by the non-government sector decreased by Lm5 million, from Lm271.3 million to Lm266.3 million.
The weighted average rate resulting from this auction was 3.5275 per cent, which is marginally lower than the previous rate of 3.5374 per cent. The new rate reflects a bid price of Lm99.1282 per Lm100 nominal.
Today, the Treasury will receive applications for 91-day bills to mature on August 29. For the following week, the Treasury will invite tenders for 91-day treasury bills to mature on September 5.
During the week under review, turnover in the secondary market amounted to Lm160,000. These were all conducted outside the Central Bank.