During the week ending November 1, excess short-term liquidity in the banking system continued to increase. This week's surplus was mainly due to the maturity of Lm61 million term deposits and the injection of Lm18 million by the Central Bank against the purchase of foreign currency. This was partly mitigated by the net purchase of treasury bills by the credit institutions amounting to approximately Lm8 million.
As a result, the Central Bank conducted a term deposit auction on Friday. During this auction the bank absorbed Lm73 million while Lm61 million matured on the same day. Accordingly outstanding term deposits increased to an all time high of Lm164 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 to 4.05 per cent at which the Central Bank conducts its weekly auctions for 14-day money.
During the week reviewed, no inter-bank deals were transacted in the local inter-bank market. Once again 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 31, 2003. Applications amounted to approximately Lm66.7 million, while the Treasury issued only Lm29 million bills. Since Lm21 million worth of treasury bills matured on the same day, outstanding bills increased by Lm8 million to Lm194.4 million.
The weighted average rate resulting from this auction was 3.9394 per cent, down marginally (0.0098 of one percentage point) from the previous 91-day. The latest rate corresponds to a price of Lm99.0274 per Lm100 nominal.
The yield resulting from this auction is 0.0106 of one percentage point lower than the Central Bank's absorption floor. This further reflects the liquidity prevailing in the banking system.
Today the Treasury will invite tenders for 91-day treasury bills to mature on February 7, 2003. In the following week the Treasury will invite tenders for 91-day bills to mature on February 14, 2003.
During the week under review, turnover in the secondary market amounted to Lm1,164,000. The Central Bank effected net purchases of Lm62,000 in its role as market maker. Deals outside the Central Bank totalled Lm1,100,000.