Excess liquidity continued to prevail in the banking sector in the week under review.
This surplus was mainly attributable to the fact that credit institutions started the new maintenance period (May 15 to June 14) with a cumulative excess in their reserve deposit accounts which they are legally bound to hold with the Central Bank.
This was partly offset by a decrease in the net foreign assets of the Central Bank of around Lm4 million and a net increase in treasury bills issued of Lm4.6 million.
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, Lm63.5 million were absorbed, half a million more than the amount maturing on the same day.
As a result, outstanding term deposits held at the Central Bank increased slightly from Lm116 million of the previous week, to Lm 116.5 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.
Unlike the previous week, no interbank deals were transacted in the secondary market, reflecting the excess liquidity in the banking sector.
In the primary market, the Treasury received tenders for 90-day treasury bills to mature on August 14.
Demand for bills was again higher when compared to the total bills issued by the Treasury.
In fact, total bids amounted to Lm24.1 million, while the Treasury issued Lm12.1 million worth of bills.
Since Lm7.5 million matured on the same day, the amount of treasury bills held by the non-government sector increased by Lm4.6 million, from Lm266.7 million to Lm271.3 million.
The weighted average rate resulting from this auction was 3.5374 per cent, which is marginally lower than the previous rate of 3.5386 per cent. The new rate reflects a bid price of Lm99.1353 per Lm100 nominal.
Today, the Treasury will invite tenders for 91-day bills to mature on August 22, 2003. Next week it will receive tenders for 91-day treasury bills to mature on August 29 2003.
During the week under review no deals were transacted in the secondary market.