The banking sector experienced an increase in the level of liquidity in the week ended October 15.
This rise was mainly attributable to the fact that credit institutions started the first day of the new reserve requirement maintenance period (October 15 - November 14) with an excess in their reserve deposit accounts which they are legally bound to hold with the Central Bank.
Contributing to this excess was the purchase from credit institutions of Lm5.2 million worth of foreign currency by the Central Bank against Maltese lira as well as Lm3.9 million government payments in direct credits which mainly related to retirement pensions and dividends.
On Friday, the Central Bank held its usual 14-day term deposit auction which coincided with the first day of the new maintenance period. An aggregate of Lm50.5 million was absorbed from the banking sector, Lm16.3 million more than the Lm34.2 million worth of term deposits which matured on the same day.
Thus the level of outstanding term deposits held by credit institutions at the Central Bank increased by Lm16.3 million, from Lm96.8 million to Lm113.1 million. The rate resulting from the latest auction remained at 2.95 per cent, being the floor of the interest rate band (2.95-3.0 per cent) at which the Central Bank conducts its term deposit auctions.
Turnover in the interbank market was up by Lm1.2 million in the week under review. Two deals were transacted in the overnight tenor totalling Lm2.7 million. The latest rate remained stable from its previous level of 2.9 per cent.
In the primary market, the Treasury invited tenders for 91-day treasury bills to mature on January 14, 2005. The number of bids submitted totalled Lm34.3 million, which exceeded the Lm19 million worth of bids accepted by the Treasury. Given that aggregate bills maturing totalled Lm19 million, the outstanding treasury bill total remained at its previous level of Lm248 million.
The latest three-month rate resulting from this auction was 2.9605 per cent, unchanged from the previous rate following auction held on September 14. The latest rate reflects a bid price of Lm99.2673 per Lm100 nominal.
Today, the Treasury will receive applications for 91-day bills to mature on January 21, 2005. For the following week, the Treasury will receive tenders for 28-day bills to mature on November 26.
There was a significant increase in secondary market treasury bill activity in the week under review compared to the previous week's level of only Lm13,000.
A total of Lm1.11 million were transacted, with the bulk of trading (Lm883,000) effected by the Central Bank in its role as market maker.