The Central Bank of Malta conducted a seven-day term-deposit auction on Friday, absorbing a total of Lm152.6 million from the banking system. This was Lm12.2 million more than the Lm140.4 million that matured on the same day. The rate resulting from the auction was 3.45 per cent, being the floor of the interest rate band (3.45-3.50 per cent) at which the Central Bank is currently conducting its term deposit auctions.
The net absorption of funds was in response to an increase in bank liquidity in the week under review.
Credit institutions started the maintenance period with an overall surplus in their statutory reserve deposit accounts with the Central Bank. In addition, direct credits relating to retirement pensions and dividend payments amounting to Lm6.8 million together with net interbank deals of Lm1 million transacted with a credit institution exempt from reserve requirements raised liquidity further.
These factors were partly offset by a Lm6.2 million net issue of Treasury bills to credit and financial institutions, a Lm3.8 million negative clearing of cheques and a Lm10.2 million outflow of funds from private sector accounts in connection with the payment of VAT and customs duties.
During the week under review, interbank market activity increased slightly, with turnover rising to Lm4.1 million from Lm3.9 million in the previous week. Of the six deals concluded, five were effected in the overnight tenor at a weighted average interest rate of 3.2978 per cent, 22.76 basis points lower than the weighted average interest rate of the previous week.
The other deal was struck in the one-week tenor at a rate of 3.43 per cent, unchanged from the previous week.
In the primary market for Treasury bills, the Treasury invited tenders for 91-day bills maturing on October 20. From the Lm15.1 million worth of bids submitted, Lm10 million were accepted by the Treasury. Since Lm4.7 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by Lm5.3 million to Lm134.5 million.
The latest three-month Treasury bill rate resulting from the week's auction was 3.5733 per cent, 1.72 basis points higher than the rate on similar bills issued on July 14. The latest rate reflected a bid price of Lm99.1170 per Lm100 nominal.
Meanwhile, in the secondary market for Treasury bills, turnover decreased to Lm0.7 million, from Lm1.3 million in the previous week. All deals were transacted with the Central Bank in its role of market-maker.
Today, the Treasury will again invite tenders for 91-day bills maturing on October 27.