Excess short-term liquidity in the banking system continued to increase last week. This was mainly due to Lm70 million maturing term deposits, the injection of Maltese lira by the Central Bank against the purchase of foreign currency from credit institutions amounting to Lm6 million and a surplus in the banks' reserve deposit accounts which they are legally bound to hold with the Central Bank.
This excess liquidity was partly offset by an increase in banks' treasury bill holdings of Lm6.1 million together with currency withdrawals by credit institutions amounting to Lm2.4 million.
Accordingly, a 15-day term-deposit auction was conducted by the Central Bank on Thursday, Friday being a public holiday. The bank invited tenders within the rate band of 3.7-3.75 per cent.
During the auction, Lm82 million were absorbed, Lm12 million more than the amount maturing on the same day. As a result, outstanding term deposits increased to Lm136.3 million from the Lm124.3 million of the previous week.
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.
One interbank deal was transacted in the week under review, amounting to Lm1.5 million. This deal was conducted in the overnight tenor at a rate of 3.55 per cent, which is five basis points lower than the previous overnight rate transacted on March 14, at a rate of 3.6 per cent.
In the primary market, the Treasury received tenders for 274-day treasury bills to mature on January 16, 2004. Once again, demand for treasury bills exceeded the amount issued, where total bids amounted to Lm61.8 million, while the Treasury issued Lm21 million worth of bills. Since Lm15 million matured on the same day, the level of outstanding treasury bills increased to Lm253.7 million.
The weighted average rate resulting from this auction was 3.467 per cent, which is 134 basis points lower than previous rate of the same tenor. The latest 274-day auction was conducted over a year ago, on January 18, 2002. The new rate reflects a bid price of Lm97.4634 per Lm100 nominal.
Today the Treasury will receive bids for 91-day bills to mature on July 25.
During the week under review, turnover in the secondary market amounted to Lm465,000, with Lm300,000 transacted outside the Central Bank. Turnover was Lm1,053,000 lower than the previous week's level.