On Thursday, 29 September 2005, The Governor of the Central Bank of Malta, following the monthly meeting with the Monetary Policy Advisory Council, decided last Thursday to leave the Bank's Central intervention rate unchanged at 3.25 per cent.

Liquidity in the banking system increased sharply in the week under review when compared to the previous week. This was mainly due to net maturing Treasury bills of Lm9.6 million and government direct credits amounting to Lm5.1 million. There was also the sale of foreign currency against the Maltese lira by the credit institutions to the Central Bank of Malta amounting to Lm2.5 million and dividend payments of Lm2.8 million which increased liquidity further.

Partially offsetting this increase in liquidity was a negative net clearing of cheques amounting to Lm2.4 million.

Accordingly, on Friday, the Central Bank conducted a seven-day term-deposit auction. An aggregate of Lm80.5 million was absorbed from the banking sector, Lm40.5 million more than the Lm40 million worth of term deposits that matured on the same day.

The rate resulting from the latest auction was 3.20 per cent, being the floor of the interest rate band (3.20-3.25 per cent) at which the Central Bank conducts its auctions.

Interbank activity in the week under review amounted to Lm7.3 million, practically unchanged from the previous week's level of deals transacted.

In the primary market, the Treasury invited tenders for 364-day Treasury bills to mature on September 29, 2006. Only Lm3 million of the Lm29.9 million worth of bids submitted were accepted by the Treasury.

Given that Lm12.6 million worth of bills matured during the week under review, the outstanding balance of Treasury bills decreased by Lm9.6 million, from Lm184.1 million to Lm174.5 million.

The latest 12-month rate resulting from this auction was 3.3993 per cent. This was 10.3 basis points lower than the previous 364-day rate for bills issued on July 1. The latest rate reflects a bid price of Lm96.7212 per Lm100 nominal.

Today, the Treasury will receive applications for 91-day bills to mature on January 6, 2006. For the following week, the Treasury will accept bids in the same tenor to mature on January 13, 2006.

Turnover in the secondary market decreased considerably from the previous week's level of Lm5.7 million to Lm1.5 million.

All trading was effected by the Central Bank in its role of market-maker.