On April 13, the Central Bank of Malta conducted an eight-day term deposit auction (April 14 being a public holiday), absorbing a total of Lm66 million from the banking system, or Lm16 million less than the amount that matured on the same day. The rate resulting from the auction was 3.20 per cent, being the floor of the interest rate band (3.20-3.25 per cent) at which the bank is currently conducting its term deposit auctions.
The net injection of funds by the bank was in response to the fact that during the preceding week, the last of the maintenance period (March 15-April 14) liquidity in the banking system had declined. The main factors behind this development were a negative net clearing of cheques of Lm3.6 million and the purchase of foreign currency against the Maltese lira from the bank amounting to Lm3.5 million. In addition, a Lm3.3 million increase in currency in circulation and a Lm1.2 million net issue of Treasury bills reduced liquidity further. Partly offsetting these factors were government direct credits related to pensions amounting to Lm2.8 million.
During the week interbank activity decreased to Lm2.4 million, from Lm5.1 million in the previous week. Three deals were struck in the overnight tenor at a weighted average interest rate of 3.24 per cent. This represented a decrease of three basis points from the rate on a similar deal effected in the previous week. Another deal was transacted in the one week tenor at a rate of 3.22 per cent, which was down by three basis points when compared with the rate on a similar deal transacted on March 24.
In the primary market for Treasury bills, the Treasury invited tenders for 92-day bills maturing on July 14. From the Lm23.3 million worth of bids submitted, tenders for Lm8.2 million were accepted by the Treasury. Since Lm7 million worth of bills matured during the week, the outstanding balance of Treasury bills increased by Lm1.2 million, from Lm177.9 million to Lm179.1 million.
The latest three-month rate resulting from the week's Treasury bill auction was 3.2390 per cent, an increase of 4.1 basis points from the rate for 91-day bills issued the previous week. This reflected a bid price of Lm99.1902 per Lm100 nominal.
Today, the Treasury will invite tenders for 91-day bills to be issued on Friday and maturing on July 21. In the following week, the Treasury will accept bids in the same tenor for bills to be issued on April 28 and maturing on July 28.
Activity in the secondary market for Treasury bills fell sharply from the previous the week's level of Lm3.4 million, to Lm0.08 million. All deals were effected by the bank in its role of market-maker.