The Governor of the Central Bank, following the monthly meeting with the Monetary Policy Advisory Council, decided to raise the Bank's central intervention rate by 25 basis points to 3.25 per cent (see www.centralbankmalta.com).
In contrast to the preceding week, liquidity in the banking sector decreased during the week under review. The main factors inducing this decrease in liquidity were the net purchase of foreign currency against the Maltese lira from the Central Bank by the credit institutions amounting to Lm7.1 million and the net issue of new Treasury bills amounting to Lm4.3 million.
Furthermore, there was an increase in currency in circulation of Lm1.1 million which further reduced liquidity. Partially offsetting these outflows from the banking system were government payments amounting to Lm4 million and a positive net clearing of cheques of Lm1.4 million.
On Friday, the Central Bank of Malta held a 14-day term-deposit auction. There were no bids forthcoming from the banking sector for new term deposits. As such, since Lm10 million worth of term deposits matured on the same day, the level of outstanding term deposits decreased from Lm39.4 million to Lm29.4 million.
In the week under review, interbank market activity picked up sharply and six deals amounting to Lm17.2 million were transacted. Four deals totalling Lm13.2 million were conducted in the one-week tenor at a weighted average rate of 2.9748 per cent. This was 2.5 basis points higher from the previous seven-day interbank deal transacted on March 24.
Another deal amounting to Lm3 million was transacted in the overnight tenor at the rate of 2.95 per cent, which was one basis point less than the previous deal transacted on March 11.
A further deal of Lm1 million was transacted in the two-week period at a rate of 2.97 per cent, also down by one basis point from the previous 14-day deal transacted on March 23.
In the primary market, the Treasury invited tenders for 91-day to mature on July 8. The amounts of bids submitted totalled Lm9.3 million of which the Treasury accepted Lm6.3 million. Given that Lm2 million worth of bills matured during the week under review, the outstanding balance of Treasury bills increased by Lm4.3 million from Lm232.9 million to Lm237.2 million.
The latest three-month rate resulting from this auction was 2.9825 per cent, up by 0.2 basis points from the previous 91-day rate for bills issued on March 11. This rate reflects a bid price of Lm99.2619 per Lm100 nominal.
Today, the Treasury will receive applications for 28-day bills to mature on May 13. For the following week, the Treasury will accept bids for 182-day Treasury bills to mature on October 21.
Trading in the secondary Treasury bill market increased substantially from previous week's level of Lm0.4 million to Lm3.3 million. All trading was effected by the Central Bank in its role as market-maker.