On Friday, the Central Bank of Malta conducted a seven-day term deposit auction absorbing Lm192 million from the banking system. This was Lm25 million more than the Lm167 million that matured on the same day. The interest rate that resulted from the auction was 4.20 per cent, which is the floor of the interest rate band at which the bank is currently conducting its term deposit auctions.

The net absorption of funds was in response to an increase in liquidity in the banking system during the week under review. The factors contributing to this were maturing Treasury bills affecting the banking system of Lm9 million, a contraction of currency in circulation of Lm7.7 million, government direct credits of Lm3.3 million and the fact that credit institutions began the week with an overall surplus in their reserve deposit accounts. Partly offsetting these liquidity boosting factors were purchases of foreign currency from the bank amounting to Lm4.4 million and net negative cheque clearing of Lm5.5 million. No Interbank deals were conducted during the week.

In the primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on March 14, 2008. Out of the Lm32.1 million worth of bids submitted, none were accepted. Given that Treasury bills amounting to Lm11.6 million matured during the week, the outstanding balance of Treasury bills decreased by the same amount to stand at Lm152.3 million.

Today the Treasury will invite tenders for 90-day and 273-day bills maturing respectively on March 20 and September 19, 2008. The following week the Treasury will invite tenders for 91-day and 182-day bills maturing respectively on March 28 and June 27 2008.

Treasury bill trading on the Malta Stock Exchange amounted to Lm106,000 while off-exchange transactions totalled to Lm192,000. All transactions were conducted by the bank in its role as market maker.