Excess short-term liquidity in the banking system continued to increase during the week ended last Friday. Last week's surplus was mainly due to the maturity of Lm57.8 million term deposits, direct credits of Lm10.2 million mainly relating to the payment of salaries, together with the injection of Lm13.7 against the purchase of foreign currency by the Central Bank. On the other hand, credit institutions started the week with a cumulative shortfall in the reserve deposit accounts which they are legally bound to hold with the Central Bank.
Consequently, the Central Bank conducted a term deposit auction on Friday. During this auction the Bank absorbed Lm91 million while Lm57.8 million matured on the same day. Accordingly, outstanding term deposits increased to an all time high of Lm152 million. The latest auction was carried out at the weighted average rate of 3.95 per cent, being the floor of the interest rate band of 3.95-4.05 per cent at which the Central Bank conducts its weekly auctions for 14-day money.
Once again no inter-bank deals were transacted in the domestic markets. This reflects the surplus liquidity position of all the credit institutions.
In the primary market for treasury bills, the government invited tenders for 91-day treasury bills to mature on January 24, 2003. Applications amounted to approximately Lm44.9 million, while the Treasury issued only Lm17 million bills. Since Lm18 million worth of treasury bills matured on the same day, outstanding bills decreased by Lm1 million to Lm186.4 million.
The weighted average rate resulting from this auction was 3.9492 per cent, down marginally (0.0008 of one percentage point) from the previous auction in the 91-day tenor. The latest rate corresponds to a price of Lm99.0250 per Lm100 nominal.
Today the Treasury will invite tenders for 91-day treasury bills to mature on January 31, 2003. Next week the Treasury will invite tenders for 91-day bills to mature on February 7, 2003.
During the week under review, turnover in the secondary market amounted to Lm167,000. All deals were transacted with the Central Bank. Infact, the Bank effected net purchases of Lm159,000 in its role as a market maker.